Correlation Between Hyundai and Keum Kang
Can any of the company-specific risk be diversified away by investing in both Hyundai and Keum Kang 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 Keum Kang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Keum Kang Steel, you can compare the effects of market volatilities on Hyundai and Keum Kang 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 Keum Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Keum Kang.
Diversification Opportunities for Hyundai and Keum Kang
Poor diversification
The 3 months correlation between Hyundai and Keum is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Keum Kang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keum Kang Steel 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 Keum Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keum Kang Steel has no effect on the direction of Hyundai i.e., Hyundai and Keum Kang go up and down completely randomly.
Pair Corralation between Hyundai and Keum Kang
Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.67 times more return on investment than Keum Kang. However, Hyundai Motor is 1.5 times less risky than Keum Kang. It trades about -0.1 of its potential returns per unit of risk. Keum Kang Steel is currently generating about -0.14 per unit of risk. If you would invest 22,850,000 in Hyundai Motor on August 25, 2024 and sell it today you would lose (1,150,000) from holding Hyundai Motor or give up 5.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Keum Kang Steel
Performance |
| Timeline |
| Hyundai Motor |
| Keum Kang Steel |
Hyundai and Keum Kang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Keum Kang
The main advantage of trading using opposite Hyundai and Keum Kang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Keum Kang 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 Keum Kang will offset losses from the drop in Keum Kang's long position.| Hyundai vs. Lotte Chilsung Beverage | Hyundai vs. DSC Investment | Hyundai vs. EBEST Investment Securities | Hyundai vs. Dongil Metal Co |
| Keum Kang vs. Tae Kyung Chemical | Keum Kang vs. Lotte Fine Chemical | Keum Kang vs. Koryo Credit Information | Keum Kang vs. Sung Bo Chemicals |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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