Correlation Between SKONEC Entertainment and Hyundai Engineering

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

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

Diversification Opportunities for SKONEC Entertainment and Hyundai Engineering

0.7

Correlation Coefficient

SKONEC Entertainment  Hyundai Engineering

Poor diversification

The 3 months correlation between SKONEC and Hyundai is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SKONEC Entertainment Co and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and SKONEC Entertainment 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 SKONEC Entertainment Co 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 SKONEC Entertainment i.e., SKONEC Entertainment and Hyundai Engineering go up and down completely randomly.

Pair Corralation between SKONEC Entertainment and Hyundai Engineering

Assuming the 90 days trading horizon SKONEC Entertainment Co is expected to generate 1.97 times more return on investment than Hyundai Engineering. However, SKONEC Entertainment is 1.97 times more volatile than Hyundai Engineering Construction. It trades about 0.15 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about 0.21 per unit of risk. If you would invest  312,000  in SKONEC Entertainment Co on December 25, 2024 and sell it today you would earn a total of  146,500  from holding SKONEC Entertainment Co or generate 46.96% return on investment over 90 days.

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

SKONEC Entertainment Co  vs.  Hyundai Engineering Constructi

SKONEC Entertainment

Risk-Adjusted Performance

Good

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

Hyundai Engineering

Risk-Adjusted Performance

Good

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 SKONEC Entertainment and Hyundai Engineering

The main advantage of trading using opposite SKONEC Entertainment and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SKONEC Entertainment 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 SKONEC Entertainment Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.