Correlation Between Hyundai Heavy and DB Financial

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

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

Diversification Opportunities for Hyundai Heavy and DB Financial

0.19

Correlation Coefficient

Hyundai Heavy  DB Financial

Average diversification

The 3 months correlation between Hyundai and 016610 is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Heavy Industries and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and Hyundai Heavy 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 Heavy Industries are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of Hyundai Heavy i.e., Hyundai Heavy and DB Financial go up and down completely randomly.

Pair Corralation between Hyundai Heavy and DB Financial

Assuming the 90 days trading horizon Hyundai Heavy Industries is expected to generate 2.34 times more return on investment than DB Financial. However, Hyundai Heavy is 2.34 times more volatile than DB Financial Investment. It trades about 0.12 of its potential returns per unit of risk. DB Financial Investment is currently generating about -0.02 per unit of risk. If you would invest  8,050,000  in Hyundai Heavy Industries on October 25, 2024 and sell it today you would earn a total of  390,000  from holding Hyundai Heavy Industries or generate 4.84% return on investment over 90 days.

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

Hyundai Heavy Industries  vs.  DB Financial Investment

Hyundai Heavy Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Heavy Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hyundai Heavy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DB Financial 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 Heavy and DB Financial

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

The idea behind Hyundai Heavy Industries and DB Financial Investment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.