Correlation Between Formetal and Hankukpackage

Can any of the company-specific risk be diversified away by investing in both Formetal and Hankukpackage 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 Formetal and Hankukpackage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Formetal Co and Hankukpackage Co, you can compare the effects of market volatilities on Formetal and Hankukpackage 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 Formetal with a short position of Hankukpackage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Hankukpackage.

Diversification Opportunities for Formetal and Hankukpackage

0.07

Correlation Coefficient

Formetal  Hankukpackage

Significant diversification

The 3 months correlation between Formetal and Hankukpackage is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Hankukpackage Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankukpackage and Formetal 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 Formetal Co are associated (or correlated) with Hankukpackage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankukpackage has no effect on the direction of Formetal i.e., Formetal and Hankukpackage go up and down completely randomly.

Pair Corralation between Formetal and Hankukpackage

Assuming the 90 days trading horizon Formetal Co is expected to generate 1.74 times more return on investment than Hankukpackage. However, Formetal is 1.74 times more volatile than Hankukpackage Co. It trades about 0.06 of its potential returns per unit of risk. Hankukpackage Co is currently generating about -0.06 per unit of risk. If you would invest  278,000  in Formetal Co on September 22, 2024 and sell it today you would earn a total of  11,500  from holding Formetal Co or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Formetal Co  vs.  Hankukpackage Co

Formetal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hankukpackage

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Formetal and Hankukpackage

The main advantage of trading using opposite Formetal and Hankukpackage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Hankukpackage 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 Hankukpackage will offset losses from the drop in Hankukpackage's long position.

The idea behind Formetal Co and Hankukpackage Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .