Correlation Between Hana Financial and Kumho Ind

Can any of the company-specific risk be diversified away by investing in both Hana Financial and Kumho Ind 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 Hana Financial and Kumho Ind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hana Financial 7 and Kumho Ind, you can compare the effects of market volatilities on Hana Financial and Kumho Ind 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 Hana Financial with a short position of Kumho Ind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Financial and Kumho Ind.

Diversification Opportunities for Hana Financial and Kumho Ind

-0.55

Correlation Coefficient

Hana Financial  Kumho Ind

Excellent diversification

The 3 months correlation between Hana and Kumho is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial 7 and Kumho Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Ind and Hana Financial 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 Hana Financial 7 are associated (or correlated) with Kumho Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Ind has no effect on the direction of Hana Financial i.e., Hana Financial and Kumho Ind go up and down completely randomly.

Pair Corralation between Hana Financial and Kumho Ind

Assuming the 90 days trading horizon Hana Financial 7 is expected to generate 1.73 times more return on investment than Kumho Ind. However, Hana Financial is 1.73 times more volatile than Kumho Ind. It trades about 0.08 of its potential returns per unit of risk. Kumho Ind is currently generating about -0.02 per unit of risk. If you would invest  1,774,000  in Hana Financial 7 on December 28, 2024 and sell it today you would earn a total of  256,000  from holding Hana Financial 7 or generate 14.43% return on investment over 90 days.

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

Hana Financial 7  vs.  Kumho Ind

Hana Financial 7

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Financial 7 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hana Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Kumho Ind

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hana Financial and Kumho Ind

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

The idea behind Hana Financial 7 and Kumho Ind 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.