Correlation Between Hana Materials and Choil Aluminum

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

By analyzing existing cross correlation between Hana Materials and Choil Aluminum, you can compare the effects of market volatilities on Hana Materials and Choil Aluminum 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 Choil Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Materials and Choil Aluminum.

Diversification Opportunities for Hana Materials and Choil Aluminum

0.92

Correlation Coefficient

Hana Materials  Choil Aluminum

Almost no diversification

The 3 months correlation between Hana and Choil is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and Choil Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choil Aluminum 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 Choil Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choil Aluminum has no effect on the direction of Hana Materials i.e., Hana Materials and Choil Aluminum go up and down completely randomly.

Pair Corralation between Hana Materials and Choil Aluminum

Assuming the 90 days trading horizon Hana Materials is expected to generate 3.11 times more return on investment than Choil Aluminum. However, Hana Materials is 3.11 times more volatile than Choil Aluminum. It trades about 0.19 of its potential returns per unit of risk. Choil Aluminum is currently generating about 0.34 per unit of risk. If you would invest  2,385,000  in Hana Materials on October 23, 2024 and sell it today you would earn a total of  285,000  from holding Hana Materials or generate 11.95% return on investment over 90 days.

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

Hana Materials  vs.  Choil Aluminum

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 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.

Choil Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choil Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Choil Aluminum 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 Choil Aluminum

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

The idea behind Hana Materials and Choil Aluminum 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.