Correlation Between Hwasung Industrial and Kia Corp

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

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

Diversification Opportunities for Hwasung Industrial and Kia Corp

0.82

Correlation Coefficient

Hwasung Industrial  Kia Corp

Very poor diversification

The 3 months correlation between Hwasung and Kia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hwasung Industrial Co and Kia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kia Corp and Hwasung Industrial 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 Hwasung Industrial Co are associated (or correlated) with Kia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kia Corp has no effect on the direction of Hwasung Industrial i.e., Hwasung Industrial and Kia Corp go up and down completely randomly.

Pair Corralation between Hwasung Industrial and Kia Corp

Assuming the 90 days trading horizon Hwasung Industrial Co is expected to generate 0.95 times more return on investment than Kia Corp. However, Hwasung Industrial Co is 1.06 times less risky than Kia Corp. It trades about 0.13 of its potential returns per unit of risk. Kia Corp is currently generating about 0.07 per unit of risk. If you would invest  846,495  in Hwasung Industrial Co on October 26, 2024 and sell it today you would earn a total of  128,505  from holding Hwasung Industrial Co or generate 15.18% return on investment over 90 days.

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

Hwasung Industrial Co  vs.  Kia Corp

Hwasung Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwasung Industrial Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hwasung Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Kia Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kia Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kia Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hwasung Industrial and Kia Corp

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

The idea behind Hwasung Industrial Co and Kia Corp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.