Correlation Between Grand Korea and Hanwha Solutions

Can any of the company-specific risk be diversified away by investing in both Grand Korea and Hanwha Solutions at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Grand Korea and Hanwha Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grand Korea Leisure and Hanwha Solutions, you can compare the effects of market volatilities on Grand Korea and Hanwha Solutions and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Grand Korea with a short position of Hanwha Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Korea and Hanwha Solutions.

Diversification Opportunities for Grand Korea and Hanwha Solutions

0.14

Correlation Coefficient

Grand Korea  Hanwha Solutions

Average diversification

The 3 months correlation between Grand and Hanwha is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Grand Korea Leisure and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions and Grand Korea is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Grand Korea Leisure are associated (or correlated) with Hanwha Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Solutions has no effect on the direction of Grand Korea i.e., Grand Korea and Hanwha Solutions go up and down completely randomly.

Pair Corralation between Grand Korea and Hanwha Solutions

Assuming the 90 days trading horizon Grand Korea is expected to generate 4.77 times less return on investment than Hanwha Solutions. But when comparing it to its historical volatility, Grand Korea Leisure is 4.04 times less risky than Hanwha Solutions. It trades about 0.19 of its potential returns per unit of risk. Hanwha Solutions is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,596,000  in Hanwha Solutions on October 26, 2024 and sell it today you would earn a total of  329,000  from holding Hanwha Solutions or generate 20.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Grand Korea Leisure  vs.  Hanwha Solutions

Grand Korea Leisure

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Korea Leisure are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grand Korea may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hanwha Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanwha Solutions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grand Korea and Hanwha Solutions

The main advantage of trading using opposite Grand Korea and Hanwha Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Korea position performs unexpectedly, Hanwha Solutions can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hanwha Solutions will offset losses from the drop in Hanwha Solutions' long position.

The idea behind Grand Korea Leisure and Hanwha Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..