Correlation Between Haesung DS and Hana Materials

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

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

Diversification Opportunities for Haesung DS and Hana Materials

0.89

Correlation Coefficient

Haesung DS  Hana Materials

Very poor diversification

The 3 months correlation between Haesung and Hana is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Haesung DS Co and Hana Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Materials and Haesung DS 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 Haesung DS Co are associated (or correlated) with Hana Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Materials has no effect on the direction of Haesung DS i.e., Haesung DS and Hana Materials go up and down completely randomly.

Pair Corralation between Haesung DS and Hana Materials

Assuming the 90 days trading horizon Haesung DS is expected to generate 1.1 times less return on investment than Hana Materials. But when comparing it to its historical volatility, Haesung DS Co is 1.06 times less risky than Hana Materials. It trades about 0.16 of its potential returns per unit of risk. Hana Materials is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,354,681  in Hana Materials on November 28, 2024 and sell it today you would earn a total of  960,319  from holding Hana Materials or generate 40.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Haesung DS Co  vs.  Hana Materials

Haesung DS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Haesung DS Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Haesung DS sustained solid returns over the last few months and may actually be approaching a breakup point.

Hana Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Materials are ranked lower than 12 (%) 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.

Pair Trading with Haesung DS and Hana Materials

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

The idea behind Haesung DS Co and Hana Materials 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.