Correlation Between Hyundai and Shinil Electronics

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

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

Diversification Opportunities for Hyundai and Shinil Electronics

0.2

Correlation Coefficient

Hyundai  Shinil Electronics

Modest diversification

The 3 months correlation between Hyundai and Shinil is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Shinil Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinil Electronics and Hyundai 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 Motor are associated (or correlated) with Shinil Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinil Electronics has no effect on the direction of Hyundai i.e., Hyundai and Shinil Electronics go up and down completely randomly.

Pair Corralation between Hyundai and Shinil Electronics

Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the Shinil Electronics. In addition to that, Hyundai is 1.38 times more volatile than Shinil Electronics Co. It trades about -0.06 of its total potential returns per unit of risk. Shinil Electronics Co is currently generating about 0.07 per unit of volatility. If you would invest  141,710  in Shinil Electronics Co on December 1, 2024 and sell it today you would earn a total of  7,690  from holding Shinil Electronics Co or generate 5.43% return on investment over 90 days.

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

Hyundai Motor  vs.  Shinil Electronics Co

Hyundai Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hyundai Motor 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.

Shinil Electronics

Risk-Adjusted Performance

Modest

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

Pair Trading with Hyundai and Shinil Electronics

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

The idea behind Hyundai Motor and Shinil Electronics 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.