Correlation Between Hyundai Industrial and Hyosung Chemical

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

Diversification Opportunities for Hyundai Industrial and Hyosung Chemical

0.19

Correlation Coefficient

Hyundai Industrial  Hyosung Chemical

Average diversification

The 3 months correlation between Hyundai and Hyosung is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Industrial Co and Hyosung Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Chemical Corp 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 Hyosung Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Chemical Corp has no effect on the direction of Hyundai Industrial i.e., Hyundai Industrial and Hyosung Chemical go up and down completely randomly.

Pair Corralation between Hyundai Industrial and Hyosung Chemical

Assuming the 90 days trading horizon Hyundai Industrial Co is expected to under-perform the Hyosung Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Industrial Co is 3.34 times less risky than Hyosung Chemical. The stock trades about 0.0 of its potential returns per unit of risk. The Hyosung Chemical Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,040,000  in Hyosung Chemical Corp on October 26, 2024 and sell it today you would lose (255,000) from holding Hyosung Chemical Corp or give up 6.31% of portfolio value over 90 days.

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

Hyundai Industrial Co  vs.  Hyosung Chemical Corp

Hyundai Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hyundai Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hyosung Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyosung Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hyosung Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hyundai Industrial and Hyosung Chemical

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

The idea behind Hyundai Industrial Co and Hyosung Chemical Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.