Correlation Between Hyundai Engineering and Busan Industrial

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

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

Diversification Opportunities for Hyundai Engineering and Busan Industrial

-0.52

Correlation Coefficient

Hyundai Engineering  Busan Industrial

Excellent diversification

The 3 months correlation between Hyundai and Busan is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Constructi and Busan Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Industrial and Hyundai Engineering 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 Hyundai Engineering Construction are associated (or correlated) with Busan Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Industrial has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and Busan Industrial go up and down completely randomly.

Pair Corralation between Hyundai Engineering and Busan Industrial

Assuming the 90 days trading horizon Hyundai Engineering Construction is expected to generate 1.12 times more return on investment than Busan Industrial. However, Hyundai Engineering is 1.12 times more volatile than Busan Industrial Co. It trades about 0.18 of its potential returns per unit of risk. Busan Industrial Co is currently generating about -0.05 per unit of risk. If you would invest  2,575,000  in Hyundai Engineering Construction on December 25, 2024 and sell it today you would earn a total of  760,000  from holding Hyundai Engineering Construction or generate 29.51% return on investment over 90 days.

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

Hyundai Engineering Constructi  vs.  Busan Industrial Co

Hyundai Engineering

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Engineering Construction are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Busan Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Busan Industrial 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.

Pair Trading with Hyundai Engineering and Busan Industrial

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

The idea behind Hyundai Engineering Construction and Busan Industrial 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..