Correlation Between Hanjoo Light and Seoulin Bioscience

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

Diversification Opportunities for Hanjoo Light and Seoulin Bioscience

0.21

Correlation Coefficient

Hanjoo Light  Seoulin Bioscience

Modest diversification

The 3 months correlation between Hanjoo and Seoulin is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hanjoo Light Metal and Seoulin Bioscience CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoulin Bioscience CoLtd 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 Seoulin Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoulin Bioscience CoLtd has no effect on the direction of Hanjoo Light i.e., Hanjoo Light and Seoulin Bioscience go up and down completely randomly.

Pair Corralation between Hanjoo Light and Seoulin Bioscience

Assuming the 90 days trading horizon Hanjoo Light Metal is expected to generate 1.17 times more return on investment than Seoulin Bioscience. However, Hanjoo Light is 1.17 times more volatile than Seoulin Bioscience CoLtd. It trades about -0.03 of its potential returns per unit of risk. Seoulin Bioscience CoLtd is currently generating about -0.06 per unit of risk. If you would invest  74,900  in Hanjoo Light Metal on December 24, 2024 and sell it today you would lose (3,200) from holding Hanjoo Light Metal or give up 4.27% 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.  Seoulin Bioscience CoLtd

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.

Seoulin Bioscience CoLtd

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Hanjoo Light Metal and Seoulin Bioscience CoLtd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.