Correlation Between KMH Hitech and Hyundai Industrial

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Can any of the company-specific risk be diversified away by investing in both KMH Hitech 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 KMH Hitech and Hyundai Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KMH Hitech Co and Hyundai Industrial Co, you can compare the effects of market volatilities on KMH Hitech 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 KMH Hitech with a short position of Hyundai Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of KMH Hitech and Hyundai Industrial.

Diversification Opportunities for KMH Hitech and Hyundai Industrial

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between KMH and Hyundai is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding KMH Hitech Co and Hyundai Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Industrial and KMH Hitech 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 KMH Hitech Co 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 KMH Hitech i.e., KMH Hitech and Hyundai Industrial go up and down completely randomly.

Pair Corralation between KMH Hitech and Hyundai Industrial

Assuming the 90 days trading horizon KMH Hitech Co is expected to under-perform the Hyundai Industrial. In addition to that, KMH Hitech is 1.47 times more volatile than Hyundai Industrial Co. It trades about -0.12 of its total potential returns per unit of risk. Hyundai Industrial Co is currently generating about -0.08 per unit of volatility. If you would invest  532,000  in Hyundai Industrial Co on August 29, 2024 and sell it today you would lose (14,000) from holding Hyundai Industrial Co or give up 2.63% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

KMH Hitech Co  vs.  Hyundai Industrial Co

 Performance 
       Timeline  
KMH Hitech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KMH Hitech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Hyundai Industrial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hyundai Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

KMH Hitech and Hyundai Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KMH Hitech and Hyundai Industrial

The main advantage of trading using opposite KMH Hitech and Hyundai Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KMH Hitech 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.
The idea behind KMH Hitech Co and Hyundai Industrial Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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