Correlation Between Pharmicell and Hyundai Engineering

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

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

Diversification Opportunities for Pharmicell and Hyundai Engineering

0.8

Correlation Coefficient

Pharmicell  Hyundai Engineering

Very poor diversification

The 3 months correlation between Pharmicell and Hyundai is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Pharmicell and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Pharmicell 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 Pharmicell are associated (or correlated) with Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of Pharmicell i.e., Pharmicell and Hyundai Engineering go up and down completely randomly.

Pair Corralation between Pharmicell and Hyundai Engineering

Assuming the 90 days trading horizon Pharmicell is expected to generate 1.77 times more return on investment than Hyundai Engineering. However, Pharmicell is 1.77 times more volatile than Hyundai Engineering Construction. It trades about 0.15 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about 0.21 per unit of risk. If you would invest  798,000  in Pharmicell on December 26, 2024 and sell it today you would earn a total of  342,000  from holding Pharmicell or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Pharmicell  vs.  Hyundai Engineering Constructi

Pharmicell

Risk-Adjusted Performance

OK

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

Hyundai Engineering

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Engineering Construction are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pharmicell and Hyundai Engineering

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

The idea behind Pharmicell and Hyundai Engineering Construction 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.