Correlation Between Hyundai Engineering and Korea Investment

Can any of the company-specific risk be diversified away by investing in both Hyundai Engineering and Korea Investment 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 Korea Investment 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 Korea Investment Holdings, you can compare the effects of market volatilities on Hyundai Engineering and Korea Investment 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 Korea Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Engineering and Korea Investment.

Diversification Opportunities for Hyundai Engineering and Korea Investment

0.13

Correlation Coefficient

Hyundai Engineering  Korea Investment

Average diversification

The 3 months correlation between Hyundai and Korea is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Plastics and Korea Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Investment Holdings 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 Korea Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Investment Holdings has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and Korea Investment go up and down completely randomly.

Pair Corralation between Hyundai Engineering and Korea Investment

Assuming the 90 days trading horizon Hyundai Engineering is expected to generate 4.1 times less return on investment than Korea Investment. But when comparing it to its historical volatility, Hyundai Engineering Plastics is 1.75 times less risky than Korea Investment. It trades about 0.13 of its potential returns per unit of risk. Korea Investment Holdings is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  4,893,995  in Korea Investment Holdings on December 2, 2024 and sell it today you would earn a total of  776,005  from holding Korea Investment Holdings or generate 15.86% return on investment over 90 days.

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

Hyundai Engineering Plastics  vs.  Korea Investment Holdings

Hyundai Engineering

Risk-Adjusted Performance

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 somewhat strong basic indicators, Hyundai Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Investment Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hyundai Engineering and Korea Investment

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

The idea behind Hyundai Engineering Plastics and Korea Investment Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.