Correlation Between Hwaseung Industries and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both Hwaseung Industries and Daewoo Engineering 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 Hwaseung Industries and Daewoo Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hwaseung Industries Co and Daewoo Engineering Construction, you can compare the effects of market volatilities on Hwaseung Industries and Daewoo Engineering 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 Hwaseung Industries with a short position of Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwaseung Industries and Daewoo Engineering.
Diversification Opportunities for Hwaseung Industries and Daewoo Engineering
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hwaseung and Daewoo is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hwaseung Industries Co and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering and Hwaseung Industries 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 Hwaseung Industries Co are associated (or correlated) with Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of Hwaseung Industries i.e., Hwaseung Industries and Daewoo Engineering go up and down completely randomly.
Pair Corralation between Hwaseung Industries and Daewoo Engineering
Assuming the 90 days trading horizon Hwaseung Industries is expected to generate 1.44 times less return on investment than Daewoo Engineering. But when comparing it to its historical volatility, Hwaseung Industries Co is 1.38 times less risky than Daewoo Engineering. It trades about 0.05 of its potential returns per unit of risk. Daewoo Engineering Construction is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 366,000 in Daewoo Engineering Construction on August 30, 2024 and sell it today you would earn a total of 8,500 from holding Daewoo Engineering Construction or generate 2.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hwaseung Industries Co vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| Hwaseung Industries |
| Daewoo Engineering |
Hwaseung Industries and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hwaseung Industries and Daewoo Engineering
The main advantage of trading using opposite Hwaseung Industries and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hwaseung Industries position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.| Hwaseung Industries vs. Bohae Brewery | Hwaseung Industries vs. Ssangyong Information Communication | Hwaseung Industries vs. LB Investment | Hwaseung Industries vs. Shinsegae Information Communication |
| Daewoo Engineering vs. Shinhan Financial Group | Daewoo Engineering vs. Total Soft Bank | Daewoo Engineering vs. InfoBank | Daewoo Engineering vs. Shinsegae Information 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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