Correlation Between Hyundai Industrial and Songwon Industrial

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

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

Diversification Opportunities for Hyundai Industrial and Songwon Industrial

0.56

Correlation Coefficient

Hyundai Industrial  Songwon Industrial

Very weak diversification

The 3 months correlation between Hyundai and Songwon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Industrial Co and Songwon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songwon Industrial and Hyundai 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 Hyundai Industrial Co are associated (or correlated) with Songwon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songwon Industrial has no effect on the direction of Hyundai Industrial i.e., Hyundai Industrial and Songwon Industrial go up and down completely randomly.

Pair Corralation between Hyundai Industrial and Songwon Industrial

Assuming the 90 days trading horizon Hyundai Industrial Co is expected to generate 1.79 times more return on investment than Songwon Industrial. However, Hyundai Industrial is 1.79 times more volatile than Songwon Industrial Co. It trades about 0.13 of its potential returns per unit of risk. Songwon Industrial Co is currently generating about 0.1 per unit of risk. If you would invest  491,500  in Hyundai Industrial Co on December 30, 2024 and sell it today you would earn a total of  158,500  from holding Hyundai Industrial Co or generate 32.25% return on investment over 90 days.

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

Hyundai Industrial Co  vs.  Songwon Industrial Co

Hyundai Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Industrial Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Songwon Industrial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Songwon Industrial Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Songwon Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai Industrial and Songwon Industrial

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

The idea behind Hyundai Industrial Co and Songwon 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.