Correlation Between Korea Steel and Hyundai Heavy
Can any of the company-specific risk be diversified away by investing in both Korea Steel and Hyundai Heavy 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 Korea Steel and Hyundai Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Steel Co and Hyundai Heavy Industries, you can compare the effects of market volatilities on Korea Steel and Hyundai Heavy 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 Korea Steel with a short position of Hyundai Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Steel and Hyundai Heavy.
Diversification Opportunities for Korea Steel and Hyundai Heavy
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Korea and Hyundai is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Hyundai Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Heavy Industries and Korea 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 Korea Steel Co are associated (or correlated) with Hyundai Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Heavy Industries has no effect on the direction of Korea Steel i.e., Korea Steel and Hyundai Heavy go up and down completely randomly.
Pair Corralation between Korea Steel and Hyundai Heavy
Assuming the 90 days trading horizon Korea Steel Co is expected to under-perform the Hyundai Heavy. But the stock apears to be less risky and, when comparing its historical volatility, Korea Steel Co is 1.23 times less risky than Hyundai Heavy. The stock trades about -0.03 of its potential returns per unit of risk. The Hyundai Heavy Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 5,475,104 in Hyundai Heavy Industries on October 25, 2024 and sell it today you would earn a total of 2,964,896 from holding Hyundai Heavy Industries or generate 54.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Steel Co vs. Hyundai Heavy Industries
Performance |
| Timeline |
| Korea Steel |
| Hyundai Heavy Industries |
Korea Steel and Hyundai Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Steel and Hyundai Heavy
The main advantage of trading using opposite Korea Steel and Hyundai Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Steel position performs unexpectedly, Hyundai Heavy 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 Hyundai Heavy will offset losses from the drop in Hyundai Heavy's long position.| Korea Steel vs. Seah Steel Corp | Korea Steel vs. Ajusteel Co | Korea Steel vs. Ni Steel | Korea Steel vs. Samwon Steel |
| Hyundai Heavy vs. Formetal Co | Hyundai Heavy vs. Shinsegae Food | Hyundai Heavy vs. Songwon Industrial Co | Hyundai Heavy vs. Namhwa Industrial Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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