Correlation Between Hana Materials and Microfriend

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

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

Diversification Opportunities for Hana Materials and Microfriend

0.41

Correlation Coefficient

Hana Materials  Microfriend

Very weak diversification

The 3 months correlation between Hana and Microfriend is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hana Materials and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend 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 Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of Hana Materials i.e., Hana Materials and Microfriend go up and down completely randomly.

Pair Corralation between Hana Materials and Microfriend

Assuming the 90 days trading horizon Hana Materials is expected to generate 0.82 times more return on investment than Microfriend. However, Hana Materials is 1.22 times less risky than Microfriend. It trades about 0.0 of its potential returns per unit of risk. Microfriend is currently generating about -0.01 per unit of risk. If you would invest  4,535,664  in Hana Materials on November 28, 2024 and sell it today you would lose (1,060,664) from holding Hana Materials or give up 23.38% of portfolio value over 90 days.

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

Hana Materials  vs.  Microfriend

Hana Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hana Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Microfriend

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Hana Materials and Microfriend 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.