Correlation Between Daewoo Engineering and Hyundai Industrial
Can any of the company-specific risk be diversified away by investing in both Daewoo Engineering and Hyundai Industrial 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 Daewoo Engineering and Hyundai Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewoo Engineering Construction and Hyundai Industrial Co, you can compare the effects of market volatilities on Daewoo Engineering and Hyundai Industrial 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 Daewoo Engineering with a short position of Hyundai Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo Engineering and Hyundai Industrial.
Diversification Opportunities for Daewoo Engineering and Hyundai Industrial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Daewoo and Hyundai is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Engineering Constructio and Hyundai Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Industrial and Daewoo Engineering 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 Daewoo Engineering Construction are associated (or correlated) with Hyundai Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Industrial has no effect on the direction of Daewoo Engineering i.e., Daewoo Engineering and Hyundai Industrial go up and down completely randomly.
Pair Corralation between Daewoo Engineering and Hyundai Industrial
Assuming the 90 days trading horizon Daewoo Engineering Construction is expected to generate 1.61 times more return on investment than Hyundai Industrial. However, Daewoo Engineering is 1.61 times more volatile than Hyundai Industrial Co. It trades about 0.05 of its potential returns per unit of risk. Hyundai Industrial Co is currently generating about -0.11 per unit of risk. 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 Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daewoo Engineering Constructio vs. Hyundai Industrial Co
Performance |
| Timeline |
| Daewoo Engineering |
| Hyundai Industrial |
Daewoo Engineering and Hyundai Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewoo Engineering and Hyundai Industrial
The main advantage of trading using opposite Daewoo Engineering and Hyundai Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewoo Engineering position performs unexpectedly, Hyundai Industrial 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 Industrial will offset losses from the drop in Hyundai Industrial's long position.| Daewoo Engineering vs. Shinhan Financial Group | Daewoo Engineering vs. Total Soft Bank | Daewoo Engineering vs. InfoBank | Daewoo Engineering vs. Shinsegae Information Communication |
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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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