Correlation Between Korean Drug and Hyundai Rotem
Can any of the company-specific risk be diversified away by investing in both Korean Drug and Hyundai Rotem 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 Korean Drug and Hyundai Rotem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korean Drug Co and Hyundai Rotem Co, you can compare the effects of market volatilities on Korean Drug and Hyundai Rotem 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 Korean Drug with a short position of Hyundai Rotem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Drug and Hyundai Rotem.
Diversification Opportunities for Korean Drug and Hyundai Rotem
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Korean and Hyundai is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Korean Drug Co and Hyundai Rotem Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Rotem and Korean Drug 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 Korean Drug Co are associated (or correlated) with Hyundai Rotem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Rotem has no effect on the direction of Korean Drug i.e., Korean Drug and Hyundai Rotem go up and down completely randomly.
Pair Corralation between Korean Drug and Hyundai Rotem
Assuming the 90 days trading horizon Korean Drug is expected to generate 2.74 times less return on investment than Hyundai Rotem. But when comparing it to its historical volatility, Korean Drug Co is 1.36 times less risky than Hyundai Rotem. It trades about 0.05 of its potential returns per unit of risk. Hyundai Rotem Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,470,000 in Hyundai Rotem Co on November 3, 2024 and sell it today you would earn a total of 1,450,000 from holding Hyundai Rotem Co or generate 32.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korean Drug Co vs. Hyundai Rotem Co
Performance |
| Timeline |
| Korean Drug |
| Hyundai Rotem |
Korean Drug and Hyundai Rotem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korean Drug and Hyundai Rotem
The main advantage of trading using opposite Korean Drug and Hyundai Rotem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korean Drug position performs unexpectedly, Hyundai Rotem 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 Rotem will offset losses from the drop in Hyundai Rotem's long position.| Korean Drug vs. Jeong Moon Information | Korean Drug vs. SK Chemicals Co | Korean Drug vs. Daishin Information Communications | Korean Drug vs. Sewoon Medical Co |
| Hyundai Rotem vs. Nable Communications | Hyundai Rotem vs. Kg Chemical | Hyundai Rotem vs. Digital Power Communications | Hyundai Rotem vs. Hanil Chemical Ind |
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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