Correlation Between Hanil Iron and Hyundai

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

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

Diversification Opportunities for Hanil Iron and Hyundai

0.35

Correlation Coefficient

Hanil Iron  Hyundai

Weak diversification

The 3 months correlation between Hanil and Hyundai is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hanil Iron Steel and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Hanil Iron 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 Hanil Iron Steel are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Hanil Iron i.e., Hanil Iron and Hyundai go up and down completely randomly.

Pair Corralation between Hanil Iron and Hyundai

Assuming the 90 days trading horizon Hanil Iron Steel is expected to under-perform the Hyundai. But the stock apears to be less risky and, when comparing its historical volatility, Hanil Iron Steel is 1.06 times less risky than Hyundai. The stock trades about -0.04 of its potential returns per unit of risk. The Hyundai Motor Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,256,164  in Hyundai Motor Co on October 4, 2024 and sell it today you would earn a total of  8,343,836  from holding Hyundai Motor Co or generate 114.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Hanil Iron Steel  vs.  Hyundai Motor Co

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.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor 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 Hanil Iron and Hyundai

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

The idea behind Hanil Iron Steel and Hyundai Motor 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.