Correlation Between Seoul Food and Hyundai Green

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

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

Diversification Opportunities for Seoul Food and Hyundai Green

-0.67

Correlation Coefficient

Seoul Food  Hyundai Green

Excellent diversification

The 3 months correlation between Seoul and Hyundai is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Food Industrial and Hyundai Green Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Green Food and Seoul Food 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 Seoul Food Industrial are associated (or correlated) with Hyundai Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Green Food has no effect on the direction of Seoul Food i.e., Seoul Food and Hyundai Green go up and down completely randomly.

Pair Corralation between Seoul Food and Hyundai Green

Assuming the 90 days trading horizon Seoul Food Industrial is expected to under-perform the Hyundai Green. But the stock apears to be less risky and, when comparing its historical volatility, Seoul Food Industrial is 1.1 times less risky than Hyundai Green. The stock trades about -0.05 of its potential returns per unit of risk. The Hyundai Green Food is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,139,000  in Hyundai Green Food on October 23, 2024 and sell it today you would earn a total of  235,000  from holding Hyundai Green Food or generate 20.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.25%
Values	Daily Returns

Seoul Food Industrial  vs.  Hyundai Green Food

Seoul Food Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoul Food Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoul Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hyundai Green Food

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Seoul Food and Hyundai Green

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

The idea behind Seoul Food Industrial and Hyundai Green Food 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.