Correlation Between Miwon Chemical and Hanil Chemical

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

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

Diversification Opportunities for Miwon Chemical and Hanil Chemical

0.4

Correlation Coefficient

Miwon Chemical  Hanil Chemical

Very weak diversification

The 3 months correlation between Miwon and Hanil is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Miwon Chemical and Hanil Chemical Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Chemical Ind and Miwon Chemical 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 Miwon Chemical are associated (or correlated) with Hanil Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Chemical Ind has no effect on the direction of Miwon Chemical i.e., Miwon Chemical and Hanil Chemical go up and down completely randomly.

Pair Corralation between Miwon Chemical and Hanil Chemical

Assuming the 90 days trading horizon Miwon Chemical is expected to generate 9.9 times less return on investment than Hanil Chemical. But when comparing it to its historical volatility, Miwon Chemical is 2.42 times less risky than Hanil Chemical. It trades about 0.02 of its potential returns per unit of risk. Hanil Chemical Ind is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,013,515  in Hanil Chemical Ind on December 4, 2024 and sell it today you would earn a total of  107,485  from holding Hanil Chemical Ind or generate 10.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Miwon Chemical  vs.  Hanil Chemical Ind

Miwon Chemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Miwon Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Miwon Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanil Chemical Ind

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hanil Chemical Ind are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanil Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Miwon Chemical and Hanil Chemical

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

The idea behind Miwon Chemical and Hanil Chemical Ind 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.