Correlation Between Cheryong Industrial and Hironic

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

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

Diversification Opportunities for Cheryong Industrial and Hironic

0.7

Correlation Coefficient

Cheryong Industrial  Hironic

Poor diversification

The 3 months correlation between Cheryong and Hironic is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Hironic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hironic and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Hironic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hironic has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Hironic go up and down completely randomly.

Pair Corralation between Cheryong Industrial and Hironic

Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to under-perform the Hironic. But the stock apears to be less risky and, when comparing its historical volatility, Cheryong Industrial CoLtd is 1.1 times less risky than Hironic. The stock trades about -0.04 of its potential returns per unit of risk. The Hironic Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  677,000  in Hironic Co on October 8, 2024 and sell it today you would lose (11,000) from holding Hironic Co or give up 1.62% of portfolio value over 90 days.

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

Cheryong Industrial CoLtd  vs.  Hironic Co

Cheryong Industrial CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheryong Industrial CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hironic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cheryong Industrial and Hironic

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

The idea behind Cheryong Industrial CoLtd and Hironic 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.