Correlation Between Hyundai Engineering and Histeel

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

Diversification Opportunities for Hyundai Engineering and Histeel

0.65

Correlation Coefficient

Hyundai Engineering  Histeel

Poor diversification

The 3 months correlation between Hyundai and Histeel is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Plastics and Histeel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histeel 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 Histeel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histeel has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and Histeel go up and down completely randomly.

Pair Corralation between Hyundai Engineering and Histeel

Assuming the 90 days trading horizon Hyundai Engineering is expected to generate 20.09 times less return on investment than Histeel. But when comparing it to its historical volatility, Hyundai Engineering Plastics is 7.09 times less risky than Histeel. It trades about 0.04 of its potential returns per unit of risk. Histeel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  273,500  in Histeel on December 30, 2024 and sell it today you would earn a total of  93,000  from holding Histeel or generate 34.0% return on investment over 90 days.

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

Hyundai Engineering Plastics  vs.  Histeel

Hyundai Engineering

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Engineering Plastics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Histeel

Risk-Adjusted Performance

OK

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

Pair Trading with Hyundai Engineering and Histeel

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

The idea behind Hyundai Engineering Plastics and Histeel 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.