Correlation Between Hyundai and Oriental Precision
Can any of the company-specific risk be diversified away by investing in both Hyundai and Oriental Precision 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 and Oriental Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Oriental Precision Engineering, you can compare the effects of market volatilities on Hyundai and Oriental Precision 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 with a short position of Oriental Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Oriental Precision.
Diversification Opportunities for Hyundai and Oriental Precision
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hyundai and Oriental is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Hyundai 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 Motor are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Hyundai i.e., Hyundai and Oriental Precision go up and down completely randomly.
Pair Corralation between Hyundai and Oriental Precision
Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the Oriental Precision. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 1.92 times less risky than Oriental Precision. The stock trades about -0.08 of its potential returns per unit of risk. The Oriental Precision Engineering is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 538,000 in Oriental Precision Engineering on September 24, 2024 and sell it today you would lose (12,000) from holding Oriental Precision Engineering or give up 2.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Oriental Precision Engineering
Performance |
| Timeline |
| Hyundai Motor |
| Oriental Precision |
Hyundai and Oriental Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Oriental Precision
The main advantage of trading using opposite Hyundai and Oriental Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Oriental Precision 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 Oriental Precision will offset losses from the drop in Oriental Precision's long position.| Hyundai vs. Samyang Foods Co | Hyundai vs. Dong A Steel Technology | Hyundai vs. Sempio Foods Co | Hyundai vs. Yura Tech Co |
| Oriental Precision vs. KakaoBank Corp | Oriental Precision vs. NICE Information Service | Oriental Precision vs. Korea Information Engineering | Oriental Precision vs. Lotte Data Communication |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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