Correlation Between Handok Clean and DB Financial

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

By analyzing existing cross correlation between Handok Clean Tech and DB Financial Investment, you can compare the effects of market volatilities on Handok Clean and DB Financial 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 Handok Clean with a short position of DB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Handok Clean and DB Financial.

Diversification Opportunities for Handok Clean and DB Financial

0.22

Correlation Coefficient

Handok Clean  DB Financial

Modest diversification

The 3 months correlation between Handok and 016610 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Handok Clean Tech and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and Handok Clean 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 Handok Clean Tech are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of Handok Clean i.e., Handok Clean and DB Financial go up and down completely randomly.

Pair Corralation between Handok Clean and DB Financial

Assuming the 90 days trading horizon Handok Clean Tech is expected to under-perform the DB Financial. But the stock apears to be less risky and, when comparing its historical volatility, Handok Clean Tech is 3.08 times less risky than DB Financial. The stock trades about -0.15 of its potential returns per unit of risk. The DB Financial Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  483,500  in DB Financial Investment on September 4, 2024 and sell it today you would earn a total of  39,500  from holding DB Financial Investment or generate 8.17% return on investment over 90 days.

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

Handok Clean Tech  vs.  DB Financial Investment

Handok Clean Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Handok Clean Tech 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.

DB Financial Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Handok Clean and DB Financial

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

The idea behind Handok Clean Tech and DB Financial Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.