Correlation Between DSC Investment and Hankook Furniture

Can any of the company-specific risk be diversified away by investing in both DSC Investment and Hankook Furniture 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 DSC Investment and Hankook Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DSC Investment and Hankook Furniture Co, you can compare the effects of market volatilities on DSC Investment and Hankook Furniture 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 DSC Investment with a short position of Hankook Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of DSC Investment and Hankook Furniture.

Diversification Opportunities for DSC Investment and Hankook Furniture

0.39

Correlation Coefficient

DSC Investment  Hankook Furniture

Weak diversification

The 3 months correlation between DSC and Hankook is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding DSC Investment and Hankook Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Furniture and DSC Investment 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 DSC Investment are associated (or correlated) with Hankook Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Furniture has no effect on the direction of DSC Investment i.e., DSC Investment and Hankook Furniture go up and down completely randomly.

Pair Corralation between DSC Investment and Hankook Furniture

Assuming the 90 days trading horizon DSC Investment is expected to generate 5.64 times less return on investment than Hankook Furniture. In addition to that, DSC Investment is 1.28 times more volatile than Hankook Furniture Co. It trades about 0.02 of its total potential returns per unit of risk. Hankook Furniture Co is currently generating about 0.12 per unit of volatility. If you would invest  363,098  in Hankook Furniture Co on October 6, 2024 and sell it today you would earn a total of  41,402  from holding Hankook Furniture Co or generate 11.4% return on investment over 90 days.

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

DSC Investment  vs.  Hankook Furniture Co

DSC Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DSC Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DSC Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hankook Furniture

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hankook Furniture Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hankook Furniture may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DSC Investment and Hankook Furniture

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

The idea behind DSC Investment and Hankook Furniture 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.