Correlation Between Jeju Beer and Hanil Iron

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

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

Diversification Opportunities for Jeju Beer and Hanil Iron

0.6

Correlation Coefficient

Jeju Beer  Hanil Iron

Poor diversification

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

Pair Corralation between Jeju Beer and Hanil Iron

Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the Hanil Iron. In addition to that, Jeju Beer is 1.64 times more volatile than Hanil Iron Steel. It trades about -0.15 of its total potential returns per unit of risk. Hanil Iron Steel is currently generating about 0.0 per unit of volatility. If you would invest  188,492  in Hanil Iron Steel on December 24, 2024 and sell it today you would lose (1,992) from holding Hanil Iron Steel or give up 1.06% of portfolio value over 90 days.

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

Jeju Beer Co  vs.  Hanil Iron Steel

Jeju Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jeju Beer 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hanil Iron Steel

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jeju Beer and Hanil Iron

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

The idea behind Jeju Beer Co and Hanil Iron Steel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.