Correlation Between HuMC and Wonbang Tech

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

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

Diversification Opportunities for HuMC and Wonbang Tech

0.91

Correlation Coefficient

HuMC  Wonbang Tech

Almost no diversification

The 3 months correlation between HuMC and Wonbang is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding HuMC Co and Wonbang Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonbang Tech and HuMC 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 HuMC Co are associated (or correlated) with Wonbang Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonbang Tech has no effect on the direction of HuMC i.e., HuMC and Wonbang Tech go up and down completely randomly.

Pair Corralation between HuMC and Wonbang Tech

Assuming the 90 days trading horizon HuMC Co is expected to generate 0.34 times more return on investment than Wonbang Tech. However, HuMC Co is 2.94 times less risky than Wonbang Tech. It trades about -0.06 of its potential returns per unit of risk. Wonbang Tech Co is currently generating about -0.03 per unit of risk. If you would invest  109,700  in HuMC Co on September 25, 2024 and sell it today you would lose (11,100) from holding HuMC Co or give up 10.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.18%
Values	Daily Returns

HuMC Co  vs.  Wonbang Tech Co

HuMC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wonbang Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wonbang Tech Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HuMC and Wonbang Tech

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

The idea behind HuMC Co and Wonbang Tech 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.