Correlation Between Hyundai Engineering and Keyang Electric

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

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

Diversification Opportunities for Hyundai Engineering and Keyang Electric

0.09

Correlation Coefficient

Hyundai Engineering  Keyang Electric

Significant diversification

The 3 months correlation between Hyundai and Keyang is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Plastics and Keyang Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyang Electric Machinery and Hyundai Engineering 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 Hyundai Engineering Plastics are associated (or correlated) with Keyang Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyang Electric Machinery has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and Keyang Electric go up and down completely randomly.

Pair Corralation between Hyundai Engineering and Keyang Electric

Assuming the 90 days trading horizon Hyundai Engineering Plastics is expected to under-perform the Keyang Electric. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Engineering Plastics is 1.67 times less risky than Keyang Electric. The stock trades about -0.09 of its potential returns per unit of risk. The Keyang Electric Machinery is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  363,500  in Keyang Electric Machinery on October 26, 2024 and sell it today you would earn a total of  20,000  from holding Keyang Electric Machinery or generate 5.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Hyundai Engineering Plastics  vs.  Keyang Electric Machinery

Hyundai Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Engineering Plastics 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.

Keyang Electric Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keyang Electric Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keyang Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hyundai Engineering and Keyang Electric

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

The idea behind Hyundai Engineering Plastics and Keyang Electric Machinery 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.