Correlation Between NOVATECH and Hyundai Engineering
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
-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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.41% |
Values | Daily Returns |
NOVATECH Co vs. Hyundai Engineering Constructi
Performance |
Timeline |
NOVATECH |
Hyundai Engineering |
NOVATECH and Hyundai Engineering Volatility Contrast
Predicted Return Density |
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.NOVATECH vs. Dongil Metal Co | ||
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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