Correlation Between Hana Materials and Daehan Steel

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

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

Diversification Opportunities for Hana Materials and Daehan Steel

-0.82

Correlation Coefficient

Hana Materials  Daehan Steel

Pay attention - limited upside

The 3 months correlation between Hana and Daehan is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and Daehan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daehan Steel 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 Daehan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daehan Steel has no effect on the direction of Hana Materials i.e., Hana Materials and Daehan Steel go up and down completely randomly.

Pair Corralation between Hana Materials and Daehan Steel

Assuming the 90 days trading horizon Hana Materials is expected to generate 2.81 times more return on investment than Daehan Steel. However, Hana Materials is 2.81 times more volatile than Daehan Steel. It trades about 0.28 of its potential returns per unit of risk. Daehan Steel is currently generating about 0.11 per unit of risk. If you would invest  2,270,000  in Hana Materials on October 11, 2024 and sell it today you would earn a total of  450,000  from holding Hana Materials or generate 19.82% return on investment over 90 days.

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

Hana Materials  vs.  Daehan Steel

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.

Daehan Steel

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daehan Steel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daehan Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hana Materials and Daehan Steel

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

The idea behind Hana Materials and Daehan Steel 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.