Correlation Between BGF Retail and Hyundai Engineering

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

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

Diversification Opportunities for BGF Retail and Hyundai Engineering

0.3

Correlation Coefficient

BGF Retail  Hyundai Engineering

Weak diversification

The 3 months correlation between BGF and Hyundai is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail 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 BGF Retail 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 BGF Retail 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 BGF Retail i.e., BGF Retail and Hyundai Engineering go up and down completely randomly.

Pair Corralation between BGF Retail and Hyundai Engineering

Assuming the 90 days trading horizon BGF Retail is expected to generate 3.0 times less return on investment than Hyundai Engineering. But when comparing it to its historical volatility, BGF Retail Co is 1.92 times less risky than Hyundai Engineering. It trades about 0.12 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,600,000  in Hyundai Engineering Construction on December 24, 2024 and sell it today you would earn a total of  820,000  from holding Hyundai Engineering Construction or generate 31.54% return on investment over 90 days.

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

BGF Retail Co  vs.  Hyundai Engineering Constructi

BGF Retail

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Retail Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BGF Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 14 (%) 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 BGF Retail and Hyundai Engineering

The main advantage of trading using opposite BGF Retail and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGF Retail 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 BGF Retail 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.