Correlation Between NOVATECH and Hyundai Engineering

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Can any of the company-specific risk be diversified away by investing in both NOVATECH 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 NOVATECH and Hyundai Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NOVATECH Co and Hyundai Engineering Construction, you can compare the effects of market volatilities on NOVATECH 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 NOVATECH with a short position of Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOVATECH and Hyundai Engineering.

Diversification Opportunities for NOVATECH and Hyundai Engineering

NOVATECHHyundaiDiversified AwayNOVATECHHyundaiDiversified Away100%
-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between NOVATECH and Hyundai is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding NOVATECH 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 NOVATECH 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 NOVATECH 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 NOVATECH i.e., NOVATECH and Hyundai Engineering go up and down completely randomly.

Pair Corralation between NOVATECH and Hyundai Engineering

Assuming the 90 days trading horizon NOVATECH Co is expected to generate 2.07 times more return on investment than Hyundai Engineering. However, NOVATECH is 2.07 times more volatile than Hyundai Engineering Construction. It trades about 0.17 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about 0.08 per unit of risk. If you would invest  1,198,000  in NOVATECH Co on October 27, 2024 and sell it today you would earn a total of  741,000  from holding NOVATECH Co or generate 61.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.41%
ValuesDaily Returns

NOVATECH Co  vs.  Hyundai Engineering Constructi

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -1001020304050
JavaScript chart by amCharts 3.21.15285490 000720
       Timeline  
NOVATECH 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NOVATECH sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan10,00011,00012,00013,00014,00015,00016,00017,00018,00019,000
Hyundai Engineering 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Engineering Construction are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan24,00025,00026,00027,00028,00029,00030,00031,000

NOVATECH and Hyundai Engineering Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-15.1-11.31-7.52-3.730.04.078.2212.3616.5 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15285490 000720
       Returns  

Pair Trading with NOVATECH and Hyundai Engineering

The main advantage of trading using opposite NOVATECH and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOVATECH 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 NOVATECH 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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