Correlation Between Hyundai Steel and Spolytech

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

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

Diversification Opportunities for Hyundai Steel and Spolytech

0.59

Correlation Coefficient

Hyundai Steel  Spolytech

Very weak diversification

The 3 months correlation between Hyundai and Spolytech is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Steel and Spolytech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spolytech and Hyundai Steel 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 Steel are associated (or correlated) with Spolytech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spolytech has no effect on the direction of Hyundai Steel i.e., Hyundai Steel and Spolytech go up and down completely randomly.

Pair Corralation between Hyundai Steel and Spolytech

Assuming the 90 days trading horizon Hyundai Steel is expected to generate 1.75 times more return on investment than Spolytech. However, Hyundai Steel is 1.75 times more volatile than Spolytech Co. It trades about 0.15 of its potential returns per unit of risk. Spolytech Co is currently generating about 0.11 per unit of risk. If you would invest  2,047,276  in Hyundai Steel on December 28, 2024 and sell it today you would earn a total of  597,724  from holding Hyundai Steel or generate 29.2% return on investment over 90 days.

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

Hyundai Steel  vs.  Spolytech Co

Hyundai Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Steel are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Spolytech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spolytech Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Spolytech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai Steel and Spolytech

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

The idea behind Hyundai Steel and Spolytech 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.