Correlation Between Dream Security and Hanwha Chemical

Can any of the company-specific risk be diversified away by investing in both Dream Security and Hanwha Chemical 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 Dream Security and Hanwha Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dream Security co and Hanwha Chemical Corp, you can compare the effects of market volatilities on Dream Security and Hanwha Chemical 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 Dream Security with a short position of Hanwha Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Security and Hanwha Chemical.

Diversification Opportunities for Dream Security and Hanwha Chemical

-0.31

Correlation Coefficient

Dream Security  Hanwha Chemical

Very good diversification

The 3 months correlation between Dream and Hanwha is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dream Security co and Hanwha Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Chemical Corp and Dream Security 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 Dream Security co are associated (or correlated) with Hanwha Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Chemical Corp has no effect on the direction of Dream Security i.e., Dream Security and Hanwha Chemical go up and down completely randomly.

Pair Corralation between Dream Security and Hanwha Chemical

Assuming the 90 days trading horizon Dream Security co is expected to generate 0.89 times more return on investment than Hanwha Chemical. However, Dream Security co is 1.12 times less risky than Hanwha Chemical. It trades about 0.08 of its potential returns per unit of risk. Hanwha Chemical Corp is currently generating about -0.14 per unit of risk. If you would invest  323,000  in Dream Security co on September 15, 2024 and sell it today you would earn a total of  39,500  from holding Dream Security co or generate 12.23% return on investment over 90 days.

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

Dream Security co  vs.  Hanwha Chemical Corp

Dream Security co

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dream Security sustained solid returns over the last few months and may actually be approaching a breakup point.

Hanwha Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanwha Chemical Corp 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 Dream Security and Hanwha Chemical

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

The idea behind Dream Security co and Hanwha Chemical Corp 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.