Correlation Between Raontech and Hanil Iron

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

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

Diversification Opportunities for Raontech and Hanil Iron

0.24

Correlation Coefficient

Raontech  Hanil Iron

Modest diversification

The 3 months correlation between Raontech and Hanil is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Raontech 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 Raontech 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 Raontech 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 Raontech i.e., Raontech and Hanil Iron go up and down completely randomly.

Pair Corralation between Raontech and Hanil Iron

Assuming the 90 days trading horizon Raontech is expected to generate 2.36 times more return on investment than Hanil Iron. However, Raontech is 2.36 times more volatile than Hanil Iron Steel. It trades about 0.0 of its potential returns per unit of risk. Hanil Iron Steel is currently generating about -0.03 per unit of risk. If you would invest  542,000  in Raontech on September 20, 2024 and sell it today you would lose (196,500) from holding Raontech or give up 36.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.66%
Values	Daily Returns

Raontech  vs.  Hanil Iron Steel

Raontech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hanil Iron Steel

Risk-Adjusted Performance

0 of 100

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 Raontech and Hanil Iron

The main advantage of trading using opposite Raontech and Hanil Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raontech 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 Raontech 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.