Correlation Between Shinsegae Food and Hyundai Engineering

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

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

Diversification Opportunities for Shinsegae Food and Hyundai Engineering

0.65

Correlation Coefficient

Shinsegae Food  Hyundai Engineering

Poor diversification

The 3 months correlation between Shinsegae and Hyundai is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Food and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Shinsegae 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 Shinsegae Food 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 Shinsegae Food i.e., Shinsegae Food and Hyundai Engineering go up and down completely randomly.

Pair Corralation between Shinsegae Food and Hyundai Engineering

Assuming the 90 days trading horizon Shinsegae Food is expected to generate 0.96 times more return on investment than Hyundai Engineering. However, Shinsegae Food is 1.04 times less risky than Hyundai Engineering. It trades about -0.01 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about -0.02 per unit of risk. If you would invest  4,656,741  in Shinsegae Food on September 26, 2024 and sell it today you would lose (786,741) from holding Shinsegae Food or give up 16.89% of portfolio value over 90 days.

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

Shinsegae Food  vs.  Hyundai Engineering Constructi

Shinsegae Food

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsegae Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinsegae Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hyundai Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shinsegae Food and Hyundai Engineering

The main advantage of trading using opposite Shinsegae Food and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinsegae Food 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 Shinsegae Food 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.