Correlation Between Heungkuk Metaltech and Hyundai Mobis

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

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

Diversification Opportunities for Heungkuk Metaltech and Hyundai Mobis

-0.27

Correlation Coefficient

Heungkuk Metaltech  Hyundai Mobis

Very good diversification

The 3 months correlation between Heungkuk and Hyundai is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Heungkuk Metaltech CoLtd and Hyundai Mobis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Mobis and Heungkuk Metaltech 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 Heungkuk Metaltech CoLtd are associated (or correlated) with Hyundai Mobis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Mobis has no effect on the direction of Heungkuk Metaltech i.e., Heungkuk Metaltech and Hyundai Mobis go up and down completely randomly.

Pair Corralation between Heungkuk Metaltech and Hyundai Mobis

Assuming the 90 days trading horizon Heungkuk Metaltech CoLtd is expected to under-perform the Hyundai Mobis. But the stock apears to be less risky and, when comparing its historical volatility, Heungkuk Metaltech CoLtd is 1.02 times less risky than Hyundai Mobis. The stock trades about -0.09 of its potential returns per unit of risk. The Hyundai Mobis is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  24,300,000  in Hyundai Mobis on October 9, 2024 and sell it today you would earn a total of  150,000  from holding Hyundai Mobis or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Heungkuk Metaltech CoLtd  vs.  Hyundai Mobis

Heungkuk Metaltech CoLtd

Risk-Adjusted Performance

5 of 100

Modest

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

Hyundai Mobis

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Mobis are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Mobis may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Heungkuk Metaltech and Hyundai Mobis

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

The idea behind Heungkuk Metaltech CoLtd and Hyundai Mobis 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.