Correlation Between Hwangkum Steel and Sungdo Engineering

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

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

Diversification Opportunities for Hwangkum Steel and Sungdo Engineering

0.75

Correlation Coefficient

Hwangkum Steel  Sungdo Engineering

Poor diversification

The 3 months correlation between Hwangkum and Sungdo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hwangkum Steel Technology and Sungdo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungdo Engineering and Hwangkum Steel 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 Hwangkum Steel Technology are associated (or correlated) with Sungdo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungdo Engineering has no effect on the direction of Hwangkum Steel i.e., Hwangkum Steel and Sungdo Engineering go up and down completely randomly.

Pair Corralation between Hwangkum Steel and Sungdo Engineering

Assuming the 90 days trading horizon Hwangkum Steel Technology is expected to generate 0.56 times more return on investment than Sungdo Engineering. However, Hwangkum Steel Technology is 1.78 times less risky than Sungdo Engineering. It trades about -0.14 of its potential returns per unit of risk. Sungdo Engineering Construction is currently generating about -0.13 per unit of risk. If you would invest  537,000  in Hwangkum Steel Technology on September 13, 2024 and sell it today you would lose (58,500) from holding Hwangkum Steel Technology or give up 10.89% of portfolio value over 90 days.

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

Hwangkum Steel Technology  vs.  Sungdo Engineering Constructio

Hwangkum Steel Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hwangkum Steel Technology 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.

Sungdo Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungdo 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 Hwangkum Steel and Sungdo Engineering

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

The idea behind Hwangkum Steel Technology and Sungdo 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.