Correlation Between Hanjoo Light and Lindeman Asia

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

Diversification Opportunities for Hanjoo Light and Lindeman Asia

0.89

Correlation Coefficient

Hanjoo Light  Lindeman Asia

Very poor diversification

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

Pair Corralation between Hanjoo Light and Lindeman Asia

Assuming the 90 days trading horizon Hanjoo Light Metal is expected to generate 0.79 times more return on investment than Lindeman Asia. However, Hanjoo Light Metal is 1.27 times less risky than Lindeman Asia. It trades about -0.2 of its potential returns per unit of risk. Lindeman Asia Investment is currently generating about -0.19 per unit of risk. If you would invest  105,600  in Hanjoo Light Metal on September 2, 2024 and sell it today you would lose (24,000) from holding Hanjoo Light Metal or give up 22.73% of portfolio value over 90 days.

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

Hanjoo Light Metal  vs.  Lindeman Asia Investment

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lindeman Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindeman Asia Investment 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hanjoo Light and Lindeman Asia

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

The idea behind Hanjoo Light Metal and Lindeman Asia Investment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.