Correlation Between KB No2 and Hyundai Engineering

Can any of the company-specific risk be diversified away by investing in both KB No2 and Hyundai Engineering 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 KB No2 and Hyundai Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KB No2 Special and Hyundai Engineering Plastics, you can compare the effects of market volatilities on KB No2 and Hyundai Engineering 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 KB No2 with a short position of Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of KB No2 and Hyundai Engineering.

Diversification Opportunities for KB No2 and Hyundai Engineering

0.57

Correlation Coefficient

KB No2  Hyundai Engineering

Very weak diversification

The 3 months correlation between 192250 and Hyundai is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding KB No2 Special and Hyundai Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and KB No2 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 KB No2 Special are associated (or correlated) with Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of KB No2 i.e., KB No2 and Hyundai Engineering go up and down completely randomly.

Pair Corralation between KB No2 and Hyundai Engineering

Assuming the 90 days trading horizon KB No2 Special is expected to generate 2.13 times more return on investment than Hyundai Engineering. However, KB No2 is 2.13 times more volatile than Hyundai Engineering Plastics. It trades about 0.03 of its potential returns per unit of risk. Hyundai Engineering Plastics is currently generating about -0.11 per unit of risk. If you would invest  874,955  in KB No2 Special on October 22, 2024 and sell it today you would earn a total of  25,045  from holding KB No2 Special or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.1%
Values	Daily Returns

KB No2 Special  vs.  Hyundai Engineering Plastics

KB No2 Special

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KB No2 Special are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KB No2 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hyundai Engineering

Risk-Adjusted Performance

0 of 100

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 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.

Pair Trading with KB No2 and Hyundai Engineering

The main advantage of trading using opposite KB No2 and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KB No2 position performs unexpectedly, Hyundai Engineering 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 Hyundai Engineering will offset losses from the drop in Hyundai Engineering's long position.

The idea behind KB No2 Special and Hyundai Engineering Plastics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.