Correlation Between Hyundai Engineering and Solution Advanced

Can any of the company-specific risk be diversified away by investing in both Hyundai Engineering and Solution Advanced 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 Solution Advanced 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 Solution Advanced Technology, you can compare the effects of market volatilities on Hyundai Engineering and Solution Advanced 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 Solution Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Engineering and Solution Advanced.

Diversification Opportunities for Hyundai Engineering and Solution Advanced

0.87

Correlation Coefficient

Hyundai Engineering  Solution Advanced

Very poor diversification

The 3 months correlation between Hyundai and Solution is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Constructi and Solution Advanced Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Advanced 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 Solution Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Advanced has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and Solution Advanced go up and down completely randomly.

Pair Corralation between Hyundai Engineering and Solution Advanced

Assuming the 90 days trading horizon Hyundai Engineering is expected to generate 2.11 times less return on investment than Solution Advanced. But when comparing it to its historical volatility, Hyundai Engineering Construction is 2.52 times less risky than Solution Advanced. It trades about 0.21 of its potential returns per unit of risk. Solution Advanced Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  137,500  in Solution Advanced Technology on December 26, 2024 and sell it today you would earn a total of  110,500  from holding Solution Advanced Technology or generate 80.36% return on investment over 90 days.

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

Hyundai Engineering Constructi  vs.  Solution Advanced Technology

Hyundai Engineering

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Engineering Construction are ranked lower than 16 (%) 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.

Solution Advanced

Risk-Adjusted Performance

Good

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

Pair Trading with Hyundai Engineering and Solution Advanced

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

The idea behind Hyundai Engineering Construction and Solution Advanced Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.