Correlation Between Hyundai Steel and KPX Chemical
Can any of the company-specific risk be diversified away by investing in both Hyundai Steel and KPX Chemical 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 KPX Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Steel and KPX Chemical, you can compare the effects of market volatilities on Hyundai Steel and KPX Chemical 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 KPX Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Steel and KPX Chemical.
Diversification Opportunities for Hyundai Steel and KPX Chemical
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hyundai and KPX is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Steel and KPX Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KPX Chemical 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 KPX Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KPX Chemical has no effect on the direction of Hyundai Steel i.e., Hyundai Steel and KPX Chemical go up and down completely randomly.
Pair Corralation between Hyundai Steel and KPX Chemical
Assuming the 90 days trading horizon Hyundai Steel is expected to generate 2.75 times more return on investment than KPX Chemical. However, Hyundai Steel is 2.75 times more volatile than KPX Chemical. It trades about -0.03 of its potential returns per unit of risk. KPX Chemical is currently generating about -0.12 per unit of risk. If you would invest 2,610,000 in Hyundai Steel on November 2, 2024 and sell it today you would lose (265,000) from holding Hyundai Steel or give up 10.15% 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. KPX Chemical
Performance |
| Timeline |
| Hyundai Steel |
| KPX Chemical |
Hyundai Steel and KPX Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai Steel and KPX Chemical
The main advantage of trading using opposite Hyundai Steel and KPX Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai Steel position performs unexpectedly, KPX Chemical 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 KPX Chemical will offset losses from the drop in KPX Chemical's long position.| Hyundai Steel vs. Seoyon Topmetal Co | Hyundai Steel vs. KEPCO Engineering Construction | Hyundai Steel vs. GS Retail Co | Hyundai Steel vs. Camus Engineering Construction |
| KPX Chemical vs. Sangsin Energy Display | KPX Chemical vs. GS Retail Co | KPX Chemical vs. Korea Air Svc | KPX Chemical vs. Mobileleader CoLtd |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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