Correlation Between Hyundai Heavy and Samsung Special

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

By analyzing existing cross correlation between Hyundai Heavy Industries and Samsung Special Purpose, you can compare the effects of market volatilities on Hyundai Heavy and Samsung Special 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 Hyundai Heavy with a short position of Samsung Special. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Heavy and Samsung Special.

Diversification Opportunities for Hyundai Heavy and Samsung Special

-0.43

Correlation Coefficient

Hyundai Heavy  Samsung Special

Very good diversification

The 3 months correlation between Hyundai and Samsung is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Heavy Industries and Samsung Special Purpose in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Special Purpose and Hyundai Heavy 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 Hyundai Heavy Industries are associated (or correlated) with Samsung Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Special Purpose has no effect on the direction of Hyundai Heavy i.e., Hyundai Heavy and Samsung Special go up and down completely randomly.

Pair Corralation between Hyundai Heavy and Samsung Special

Assuming the 90 days trading horizon Hyundai Heavy Industries is expected to generate 1.1 times more return on investment than Samsung Special. However, Hyundai Heavy is 1.1 times more volatile than Samsung Special Purpose. It trades about 0.07 of its potential returns per unit of risk. Samsung Special Purpose is currently generating about 0.03 per unit of risk. If you would invest  18,630,000  in Hyundai Heavy Industries on September 4, 2024 and sell it today you would earn a total of  2,470,000  from holding Hyundai Heavy Industries or generate 13.26% return on investment over 90 days.

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

Hyundai Heavy Industries  vs.  Samsung Special Purpose

Hyundai Heavy Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Heavy Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Samsung Special Purpose

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Special Purpose are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samsung Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hyundai Heavy and Samsung Special

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

The idea behind Hyundai Heavy Industries and Samsung Special Purpose 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.