Correlation Between Shinhan Inverse and Hyundai Engineering

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

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

Diversification Opportunities for Shinhan Inverse and Hyundai Engineering

0.35

Correlation Coefficient

Shinhan Inverse  Hyundai Engineering

Weak diversification

The 3 months correlation between Shinhan and Hyundai is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Inverse WTI and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Shinhan Inverse 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 Shinhan Inverse WTI 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 Shinhan Inverse i.e., Shinhan Inverse and Hyundai Engineering go up and down completely randomly.

Pair Corralation between Shinhan Inverse and Hyundai Engineering

Assuming the 90 days trading horizon Shinhan Inverse WTI is expected to under-perform the Hyundai Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Inverse WTI is 1.89 times less risky than Hyundai Engineering. The stock trades about 0.0 of its potential returns per unit of risk. The Hyundai Engineering Construction is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,529,825  in Hyundai Engineering Construction on December 26, 2024 and sell it today you would earn a total of  955,175  from holding Hyundai Engineering Construction or generate 37.76% return on investment over 90 days.

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

Shinhan Inverse WTI  vs.  Hyundai Engineering Constructi

Shinhan Inverse WTI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shinhan Inverse WTI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinhan Inverse is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hyundai Engineering

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Engineering Construction are ranked lower than 16 (%) 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 Shinhan Inverse and Hyundai Engineering

The main advantage of trading using opposite Shinhan Inverse and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Inverse 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 Shinhan Inverse WTI 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 Stocks Directory module to find actively traded stocks across global markets.