Correlation Between Hyundai Heavy and AeroSpace Technology

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

Diversification Opportunities for Hyundai Heavy and AeroSpace Technology

0.33

Correlation Coefficient

Hyundai Heavy  AeroSpace Technology

Weak diversification

The 3 months correlation between Hyundai and AeroSpace is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Heavy Industries and AeroSpace Technology of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroSpace Technology 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 AeroSpace Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroSpace Technology has no effect on the direction of Hyundai Heavy i.e., Hyundai Heavy and AeroSpace Technology go up and down completely randomly.

Pair Corralation between Hyundai Heavy and AeroSpace Technology

Assuming the 90 days trading horizon Hyundai Heavy is expected to generate 5.39 times less return on investment than AeroSpace Technology. In addition to that, Hyundai Heavy is 1.17 times more volatile than AeroSpace Technology of. It trades about 0.1 of its total potential returns per unit of risk. AeroSpace Technology of is currently generating about 0.66 per unit of volatility. If you would invest  50,800  in AeroSpace Technology of on October 24, 2024 and sell it today you would earn a total of  14,300  from holding AeroSpace Technology of or generate 28.15% return on investment over 90 days.

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

Hyundai Heavy Industries  vs.  AeroSpace Technology of

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.

AeroSpace Technology

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AeroSpace Technology of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AeroSpace Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai Heavy and AeroSpace Technology

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

The idea behind Hyundai Heavy Industries and AeroSpace Technology of 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.