Correlation Between Hyundai Steel and Hanwha Solutions
Can any of the company-specific risk be diversified away by investing in both Hyundai Steel and Hanwha Solutions 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 Steel and Hanwha Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Steel and Hanwha Solutions, you can compare the effects of market volatilities on Hyundai Steel and Hanwha Solutions 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 Steel with a short position of Hanwha Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Steel and Hanwha Solutions.
Diversification Opportunities for Hyundai Steel and Hanwha Solutions
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hyundai and Hanwha is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Steel and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions and Hyundai Steel 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 Steel are associated (or correlated) with Hanwha Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Solutions has no effect on the direction of Hyundai Steel i.e., Hyundai Steel and Hanwha Solutions go up and down completely randomly.
Pair Corralation between Hyundai Steel and Hanwha Solutions
Assuming the 90 days trading horizon Hyundai Steel is expected to generate 0.7 times more return on investment than Hanwha Solutions. However, Hyundai Steel is 1.42 times less risky than Hanwha Solutions. It trades about -0.48 of its potential returns per unit of risk. Hanwha Solutions is currently generating about -0.42 per unit of risk. If you would invest 2,570,000 in Hyundai Steel on August 28, 2024 and sell it today you would lose (475,000) from holding Hyundai Steel or give up 18.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Steel vs. Hanwha Solutions
Performance |
| Timeline |
| Hyundai Steel |
| Hanwha Solutions |
Hyundai Steel and Hanwha Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai Steel and Hanwha Solutions
The main advantage of trading using opposite Hyundai Steel and Hanwha Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai Steel position performs unexpectedly, Hanwha Solutions 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 Hanwha Solutions will offset losses from the drop in Hanwha Solutions' long position.| Hyundai Steel vs. LG Chemicals | Hyundai Steel vs. Lotte Chemical Corp | Hyundai Steel vs. Seah Steel Corp |
| Hanwha Solutions vs. LG Chemicals | Hanwha Solutions vs. Lotte Chemical Corp | Hanwha Solutions vs. Hyundai Steel | Hanwha Solutions vs. Seah Steel Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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