Correlation Between Samsung Biologics and Hanjoo Light

Can any of the company-specific risk be diversified away by investing in both Samsung Biologics and Hanjoo Light 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 Samsung Biologics and Hanjoo Light into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Samsung Biologics Co and Hanjoo Light Metal, you can compare the effects of market volatilities on Samsung Biologics and Hanjoo Light 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 Samsung Biologics with a short position of Hanjoo Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Biologics and Hanjoo Light.

Diversification Opportunities for Samsung Biologics and Hanjoo Light

0.72

Correlation Coefficient

Samsung Biologics  Hanjoo Light

Poor diversification

The 3 months correlation between Samsung and Hanjoo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Biologics Co and Hanjoo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjoo Light Metal and Samsung Biologics 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 Samsung Biologics Co are associated (or correlated) with Hanjoo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjoo Light Metal has no effect on the direction of Samsung Biologics i.e., Samsung Biologics and Hanjoo Light go up and down completely randomly.

Pair Corralation between Samsung Biologics and Hanjoo Light

Assuming the 90 days trading horizon Samsung Biologics Co is expected to under-perform the Hanjoo Light. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Biologics Co is 1.97 times less risky than Hanjoo Light. The stock trades about -0.09 of its potential returns per unit of risk. The Hanjoo Light Metal is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  76,400  in Hanjoo Light Metal on October 6, 2024 and sell it today you would earn a total of  2,400  from holding Hanjoo Light Metal or generate 3.14% return on investment over 90 days.

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

Samsung Biologics Co  vs.  Hanjoo Light Metal

Samsung Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Biologics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samsung Biologics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Samsung Biologics and Hanjoo Light

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

The idea behind Samsung Biologics Co and Hanjoo Light Metal 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.