Correlation Between RPBio and Hyosung Advanced

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

By analyzing existing cross correlation between RPBio Inc and Hyosung Advanced Materials, you can compare the effects of market volatilities on RPBio and Hyosung Advanced 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 RPBio with a short position of Hyosung Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of RPBio and Hyosung Advanced.

Diversification Opportunities for RPBio and Hyosung Advanced

0.92

Correlation Coefficient

RPBio  Hyosung Advanced

Almost no diversification

The 3 months correlation between RPBio and Hyosung is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding RPBio Inc and Hyosung Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Advanced Mat and RPBio 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 RPBio Inc are associated (or correlated) with Hyosung Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Advanced Mat has no effect on the direction of RPBio i.e., RPBio and Hyosung Advanced go up and down completely randomly.

Pair Corralation between RPBio and Hyosung Advanced

Assuming the 90 days trading horizon RPBio Inc is expected to generate 0.85 times more return on investment than Hyosung Advanced. However, RPBio Inc is 1.17 times less risky than Hyosung Advanced. It trades about 0.31 of its potential returns per unit of risk. Hyosung Advanced Materials is currently generating about 0.25 per unit of risk. If you would invest  476,000  in RPBio Inc on October 9, 2024 and sell it today you would earn a total of  67,000  from holding RPBio Inc or generate 14.08% return on investment over 90 days.

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

RPBio Inc  vs.  Hyosung Advanced Materials

RPBio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hyosung Advanced Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyosung Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RPBio and Hyosung Advanced

The main advantage of trading using opposite RPBio and Hyosung Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPBio position performs unexpectedly, Hyosung Advanced 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 Hyosung Advanced will offset losses from the drop in Hyosung Advanced's long position.

The idea behind RPBio Inc and Hyosung Advanced Materials 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.