Correlation Between Hyundai Engineering and Kumho Petro
Can any of the company-specific risk be diversified away by investing in both Hyundai Engineering and Kumho Petro 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 Engineering and Kumho Petro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Engineering Construction and Kumho Petro Chemical, you can compare the effects of market volatilities on Hyundai Engineering and Kumho Petro 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 Engineering with a short position of Kumho Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Engineering and Kumho Petro.
Diversification Opportunities for Hyundai Engineering and Kumho Petro
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hyundai and Kumho is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Constructi and Kumho Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumho Petro Chemical and Hyundai Engineering 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 Engineering Construction are associated (or correlated) with Kumho Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumho Petro Chemical has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and Kumho Petro go up and down completely randomly.
Pair Corralation between Hyundai Engineering and Kumho Petro
Assuming the 90 days trading horizon Hyundai Engineering Construction is expected to generate 1.14 times more return on investment than Kumho Petro. However, Hyundai Engineering is 1.14 times more volatile than Kumho Petro Chemical. It trades about 0.04 of its potential returns per unit of risk. Kumho Petro Chemical is currently generating about -0.12 per unit of risk. If you would invest 2,610,000 in Hyundai Engineering Construction on October 23, 2024 and sell it today you would earn a total of 25,000 from holding Hyundai Engineering Construction or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Engineering Constructi vs. Kumho Petro Chemical
Performance |
| Timeline |
| Hyundai Engineering |
| Kumho Petro Chemical |
Hyundai Engineering and Kumho Petro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai Engineering and Kumho Petro
The main advantage of trading using opposite Hyundai Engineering and Kumho Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai Engineering position performs unexpectedly, Kumho Petro 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 Kumho Petro will offset losses from the drop in Kumho Petro's long position.| Hyundai Engineering vs. BIT Computer Co | Hyundai Engineering vs. Display Tech Co | Hyundai Engineering vs. BooKook Steel Co | Hyundai Engineering vs. Korea Computer |
| Kumho Petro vs. Hanjin Transportation Co | Kumho Petro vs. Atinum Investment Co | Kumho Petro vs. Taegu Broadcasting | Kumho Petro vs. Hanwha Life Insurance |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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