Correlation Between Hana Materials and NH Investment

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

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

Diversification Opportunities for Hana Materials and NH Investment

0.31

Correlation Coefficient

Hana Materials  NH Investment

Weak diversification

The 3 months correlation between Hana and 005940 is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and NH Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Investment Securities and Hana Materials 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 Hana Materials are associated (or correlated) with NH Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Investment Securities has no effect on the direction of Hana Materials i.e., Hana Materials and NH Investment go up and down completely randomly.

Pair Corralation between Hana Materials and NH Investment

Assuming the 90 days trading horizon Hana Materials is expected to under-perform the NH Investment. In addition to that, Hana Materials is 1.48 times more volatile than NH Investment Securities. It trades about -0.16 of its total potential returns per unit of risk. NH Investment Securities is currently generating about 0.05 per unit of volatility. If you would invest  1,384,000  in NH Investment Securities on September 5, 2024 and sell it today you would earn a total of  69,000  from holding NH Investment Securities or generate 4.99% return on investment over 90 days.

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

Hana Materials  vs.  NH Investment Securities

Hana Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hana Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NH Investment Securities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NH Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hana Materials and NH Investment

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

The idea behind Hana Materials and NH Investment Securities 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.