Correlation Between Hyundai Heavy and Dongkuk Structures

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

Diversification Opportunities for Hyundai Heavy and Dongkuk Structures

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Hyundai and Dongkuk is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Heavy Industries and Dongkuk Structures Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongkuk Structures 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 Dongkuk Structures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongkuk Structures has no effect on the direction of Hyundai Heavy i.e., Hyundai Heavy and Dongkuk Structures go up and down completely randomly.

Pair Corralation between Hyundai Heavy and Dongkuk Structures

Assuming the 90 days trading horizon Hyundai Heavy Industries is expected to generate 0.59 times more return on investment than Dongkuk Structures. However, Hyundai Heavy Industries is 1.69 times less risky than Dongkuk Structures. It trades about 0.08 of its potential returns per unit of risk. Dongkuk Structures Construction is currently generating about -0.01 per unit of risk. If you would invest  6,653,272  in Hyundai Heavy Industries on October 9, 2024 and sell it today you would earn a total of  1,536,728  from holding Hyundai Heavy Industries or generate 23.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Hyundai Heavy Industries  vs.  Dongkuk Structures Constructio

 Performance 
       Timeline  
Hyundai Heavy Industries 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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.
Dongkuk Structures 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dongkuk Structures Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongkuk Structures is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hyundai Heavy and Dongkuk Structures Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hyundai Heavy and Dongkuk Structures

The main advantage of trading using opposite Hyundai Heavy and Dongkuk Structures positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai Heavy position performs unexpectedly, Dongkuk Structures 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 Dongkuk Structures will offset losses from the drop in Dongkuk Structures' long position.
The idea behind Hyundai Heavy Industries and Dongkuk Structures 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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