Correlation Between Hanjoo Light and Eagon Industrial

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

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

Diversification Opportunities for Hanjoo Light and Eagon Industrial

0.34

Correlation Coefficient

Hanjoo Light  Eagon Industrial

Weak diversification

The 3 months correlation between Hanjoo and Eagon is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hanjoo Light Metal and Eagon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagon Industrial and Hanjoo Light 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 Hanjoo Light Metal are associated (or correlated) with Eagon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagon Industrial has no effect on the direction of Hanjoo Light i.e., Hanjoo Light and Eagon Industrial go up and down completely randomly.

Pair Corralation between Hanjoo Light and Eagon Industrial

Assuming the 90 days trading horizon Hanjoo Light is expected to generate 33.1 times less return on investment than Eagon Industrial. But when comparing it to its historical volatility, Hanjoo Light Metal is 2.53 times less risky than Eagon Industrial. It trades about 0.0 of its potential returns per unit of risk. Eagon Industrial Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  510,000  in Eagon Industrial Co on December 25, 2024 and sell it today you would lose (1,000.00) from holding Eagon Industrial Co or give up 0.2% of portfolio value over 90 days.

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

Hanjoo Light Metal  vs.  Eagon Industrial Co

Hanjoo Light Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanjoo Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanjoo Light is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eagon Industrial

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eagon Industrial Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Eagon Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanjoo Light and Eagon Industrial

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

The idea behind Hanjoo Light Metal and Eagon 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.