Correlation Between PI Advanced and Hwasung Industrial

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

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

Diversification Opportunities for PI Advanced and Hwasung Industrial

-0.4

Correlation Coefficient

PI Advanced  Hwasung Industrial

Very good diversification

The 3 months correlation between 178920 and Hwasung is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding PI Advanced Materials and Hwasung Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hwasung Industrial and PI Advanced 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 PI Advanced Materials are associated (or correlated) with Hwasung Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hwasung Industrial has no effect on the direction of PI Advanced i.e., PI Advanced and Hwasung Industrial go up and down completely randomly.

Pair Corralation between PI Advanced and Hwasung Industrial

Assuming the 90 days trading horizon PI Advanced is expected to generate 2.92 times less return on investment than Hwasung Industrial. In addition to that, PI Advanced is 2.15 times more volatile than Hwasung Industrial Co. It trades about 0.02 of its total potential returns per unit of risk. Hwasung Industrial Co is currently generating about 0.14 per unit of volatility. If you would invest  886,397  in Hwasung Industrial Co on October 6, 2024 and sell it today you would earn a total of  94,603  from holding Hwasung Industrial Co or generate 10.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

PI Advanced Materials  vs.  Hwasung Industrial Co

PI Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PI Advanced 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.

Hwasung Industrial

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with PI Advanced and Hwasung Industrial

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

The idea behind PI Advanced Materials and Hwasung Industrial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.