Correlation Between Hanjoo Light and Dongsin Engineering

Can any of the company-specific risk be diversified away by investing in both Hanjoo Light and Dongsin Engineering 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 Dongsin Engineering 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 Dongsin Engineering Construction, you can compare the effects of market volatilities on Hanjoo Light and Dongsin Engineering 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 Dongsin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanjoo Light and Dongsin Engineering.

Diversification Opportunities for Hanjoo Light and Dongsin Engineering

-0.64

Correlation Coefficient

Hanjoo Light  Dongsin Engineering

Excellent diversification

The 3 months correlation between Hanjoo and Dongsin is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hanjoo Light Metal and Dongsin Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongsin Engineering 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 Dongsin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongsin Engineering has no effect on the direction of Hanjoo Light i.e., Hanjoo Light and Dongsin Engineering go up and down completely randomly.

Pair Corralation between Hanjoo Light and Dongsin Engineering

Assuming the 90 days trading horizon Hanjoo Light Metal is expected to generate 0.24 times more return on investment than Dongsin Engineering. However, Hanjoo Light Metal is 4.22 times less risky than Dongsin Engineering. It trades about 0.25 of its potential returns per unit of risk. Dongsin Engineering Construction is currently generating about 0.02 per unit of risk. If you would invest  70,800  in Hanjoo Light Metal on October 8, 2024 and sell it today you would earn a total of  8,000  from holding Hanjoo Light Metal or generate 11.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Hanjoo Light Metal  vs.  Dongsin Engineering Constructi

Hanjoo Light Metal

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dongsin Engineering

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongsin Engineering Construction are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongsin Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanjoo Light and Dongsin Engineering

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

The idea behind Hanjoo Light Metal and Dongsin Engineering Construction 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.