Correlation Between Hyunwoo Industrial and Kumho Industrial

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

By analyzing existing cross correlation between Hyunwoo Industrial Co and Kumho Industrial Co, you can compare the effects of market volatilities on Hyunwoo Industrial and Kumho Industrial 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 Hyunwoo Industrial with a short position of Kumho Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyunwoo Industrial and Kumho Industrial.

Diversification Opportunities for Hyunwoo Industrial and Kumho Industrial

0.46

Correlation Coefficient

Hyunwoo Industrial  Kumho Industrial

Very weak diversification

The 3 months correlation between Hyunwoo and Kumho is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hyunwoo Industrial Co and Kumho Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Industrial and Hyunwoo Industrial 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 Hyunwoo Industrial Co are associated (or correlated) with Kumho Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Industrial has no effect on the direction of Hyunwoo Industrial i.e., Hyunwoo Industrial and Kumho Industrial go up and down completely randomly.

Pair Corralation between Hyunwoo Industrial and Kumho Industrial

Assuming the 90 days trading horizon Hyunwoo Industrial Co is expected to generate 1.28 times more return on investment than Kumho Industrial. However, Hyunwoo Industrial is 1.28 times more volatile than Kumho Industrial Co. It trades about -0.07 of its potential returns per unit of risk. Kumho Industrial Co is currently generating about -0.12 per unit of risk. If you would invest  504,265  in Hyunwoo Industrial Co on October 22, 2024 and sell it today you would lose (255,765) from holding Hyunwoo Industrial Co or give up 50.72% of portfolio value over 90 days.

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

Hyunwoo Industrial Co  vs.  Kumho Industrial Co

Hyunwoo Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyunwoo Industrial Co 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.

Kumho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho Industrial Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hyunwoo Industrial and Kumho Industrial

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

The idea behind Hyunwoo Industrial Co and Kumho Industrial Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.