Correlation Between Hana Financial and Hyundai Engineering

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

By analyzing existing cross correlation between Hana Financial 7 and Hyundai Engineering Construction, you can compare the effects of market volatilities on Hana Financial 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 Hana Financial with a short position of Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hana Financial and Hyundai Engineering.

Diversification Opportunities for Hana Financial and Hyundai Engineering

0.74

Correlation Coefficient

Hana Financial  Hyundai Engineering

Poor diversification

The 3 months correlation between Hana and Hyundai is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hana Financial 7 and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Hana Financial 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 Hana Financial 7 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 Hana Financial i.e., Hana Financial and Hyundai Engineering go up and down completely randomly.

Pair Corralation between Hana Financial and Hyundai Engineering

Assuming the 90 days trading horizon Hana Financial is expected to generate 1.94 times less return on investment than Hyundai Engineering. In addition to that, Hana Financial is 1.45 times more volatile than Hyundai Engineering Construction. It trades about 0.08 of its total potential returns per unit of risk. Hyundai Engineering Construction is currently generating about 0.21 per unit of volatility. If you would invest  2,495,439  in Hyundai Engineering Construction on December 29, 2024 and sell it today you would earn a total of  974,561  from holding Hyundai Engineering Construction or generate 39.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Hana Financial 7  vs.  Hyundai Engineering Constructi

Hana Financial 7

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hana Financial 7 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hana Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Hyundai Engineering

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Engineering Construction are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hana Financial and Hyundai Engineering

The main advantage of trading using opposite Hana Financial and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hana Financial 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 Hana Financial 7 and Hyundai Engineering Construction 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.