Correlation Between Handok Clean and Air Busan

Can any of the company-specific risk be diversified away by investing in both Handok Clean and Air Busan 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 Air Busan 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 Air Busan Co, you can compare the effects of market volatilities on Handok Clean and Air Busan 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 Air Busan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Handok Clean and Air Busan.

Diversification Opportunities for Handok Clean and Air Busan

0.6

Correlation Coefficient

Handok Clean  Air Busan

Poor diversification

The 3 months correlation between Handok and Air is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Handok Clean Tech and Air Busan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Busan 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 Air Busan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Busan has no effect on the direction of Handok Clean i.e., Handok Clean and Air Busan go up and down completely randomly.

Pair Corralation between Handok Clean and Air Busan

Assuming the 90 days trading horizon Handok Clean Tech is expected to generate 0.62 times more return on investment than Air Busan. However, Handok Clean Tech is 1.61 times less risky than Air Busan. It trades about -0.09 of its potential returns per unit of risk. Air Busan Co is currently generating about -0.08 per unit of risk. If you would invest  640,000  in Handok Clean Tech on September 22, 2024 and sell it today you would lose (22,000) from holding Handok Clean Tech or give up 3.44% of portfolio value over 90 days.

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

Handok Clean Tech  vs.  Air Busan Co

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.

Air Busan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Handok Clean and Air Busan

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

The idea behind Handok Clean Tech and Air Busan 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.