Correlation Between Jin Air and Hankook Steel

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

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

Diversification Opportunities for Jin Air and Hankook Steel

0.49

Correlation Coefficient

Jin Air  Hankook Steel

Very weak diversification

The 3 months correlation between Jin and Hankook is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Jin Air Co and Hankook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Steel and Jin Air 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 Jin Air Co are associated (or correlated) with Hankook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Steel has no effect on the direction of Jin Air i.e., Jin Air and Hankook Steel go up and down completely randomly.

Pair Corralation between Jin Air and Hankook Steel

Assuming the 90 days trading horizon Jin Air Co is expected to under-perform the Hankook Steel. But the stock apears to be less risky and, when comparing its historical volatility, Jin Air Co is 1.93 times less risky than Hankook Steel. The stock trades about -0.08 of its potential returns per unit of risk. The Hankook Steel Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  186,400  in Hankook Steel Co on November 20, 2024 and sell it today you would lose (8,800) from holding Hankook Steel Co or give up 4.72% of portfolio value over 90 days.

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

Jin Air Co  vs.  Hankook Steel Co

Jin Air

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jin Air Co 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.

Hankook Steel

Risk-Adjusted Performance

Weak

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

Pair Trading with Jin Air and Hankook Steel

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

The idea behind Jin Air Co and Hankook Steel 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.