Correlation Between Dongwoo Farm and Hyosung Heavy

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

By analyzing existing cross correlation between Dongwoo Farm To and Hyosung Heavy Industries, you can compare the effects of market volatilities on Dongwoo Farm and Hyosung Heavy 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 Dongwoo Farm with a short position of Hyosung Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and Hyosung Heavy.

Diversification Opportunities for Dongwoo Farm and Hyosung Heavy

-0.17

Correlation Coefficient

Dongwoo Farm  Hyosung Heavy

Good diversification

The 3 months correlation between Dongwoo and Hyosung is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Hyosung Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Heavy Industries and Dongwoo Farm 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 Dongwoo Farm To are associated (or correlated) with Hyosung Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Heavy Industries has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Hyosung Heavy go up and down completely randomly.

Pair Corralation between Dongwoo Farm and Hyosung Heavy

Assuming the 90 days trading horizon Dongwoo Farm To is expected to under-perform the Hyosung Heavy. But the stock apears to be less risky and, when comparing its historical volatility, Dongwoo Farm To is 2.83 times less risky than Hyosung Heavy. The stock trades about -0.04 of its potential returns per unit of risk. The Hyosung Heavy Industries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,912,463  in Hyosung Heavy Industries on October 25, 2024 and sell it today you would earn a total of  42,487,537  from holding Hyosung Heavy Industries or generate 614.65% return on investment over 90 days.

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

Dongwoo Farm To  vs.  Hyosung Heavy Industries

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Dongwoo Farm To has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongwoo Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hyosung Heavy Industries

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hyosung Heavy Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyosung Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongwoo Farm and Hyosung Heavy

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

The idea behind Dongwoo Farm To and Hyosung Heavy Industries 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.