Correlation Between Hanjoo Light and Air Busan

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

Diversification Opportunities for Hanjoo Light and Air Busan

0.67

Correlation Coefficient

Hanjoo Light  Air Busan

Poor diversification

The 3 months correlation between Hanjoo and Air is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hanjoo Light Metal and Air Busan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Busan 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 Air Busan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Busan has no effect on the direction of Hanjoo Light i.e., Hanjoo Light and Air Busan go up and down completely randomly.

Pair Corralation between Hanjoo Light and Air Busan

Assuming the 90 days trading horizon Hanjoo Light Metal is expected to generate 1.5 times more return on investment than Air Busan. However, Hanjoo Light is 1.5 times more volatile than Air Busan Co. It trades about -0.05 of its potential returns per unit of risk. Air Busan Co is currently generating about -0.15 per unit of risk. If you would invest  75,600  in Hanjoo Light Metal on December 30, 2024 and sell it today you would lose (4,600) from holding Hanjoo Light Metal or give up 6.08% of portfolio value over 90 days.

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

Hanjoo Light Metal  vs.  Air Busan 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.

Air Busan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Busan Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hanjoo Light and Air Busan

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

The idea behind Hanjoo Light Metal and Air Busan 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 CEOs Directory module to screen CEOs from public companies around the world.