Correlation Between Handok Clean and Hyundai Engineering

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

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

Diversification Opportunities for Handok Clean and Hyundai Engineering

-0.24

Correlation Coefficient

Handok Clean  Hyundai Engineering

Very good diversification

The 3 months correlation between Handok and Hyundai is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Handok Clean Tech and Hyundai Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Handok Clean 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 Handok Clean Tech 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 Handok Clean i.e., Handok Clean and Hyundai Engineering go up and down completely randomly.

Pair Corralation between Handok Clean and Hyundai Engineering

Assuming the 90 days trading horizon Handok Clean Tech is expected to generate 1.73 times more return on investment than Hyundai Engineering. However, Handok Clean is 1.73 times more volatile than Hyundai Engineering Plastics. It trades about 0.02 of its potential returns per unit of risk. Hyundai Engineering Plastics is currently generating about 0.01 per unit of risk. If you would invest  604,000  in Handok Clean Tech on December 25, 2024 and sell it today you would earn a total of  7,000  from holding Handok Clean Tech or generate 1.16% return on investment over 90 days.

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

Handok Clean Tech  vs.  Hyundai Engineering Plastics

Handok Clean Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Handok Clean Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Handok Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hyundai Engineering

Risk-Adjusted Performance

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 somewhat strong basic indicators, Hyundai Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Handok Clean and Hyundai Engineering

The main advantage of trading using opposite Handok Clean and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Handok Clean 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 Handok Clean Tech 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.