Correlation Between Hyundai Engineering and FoodNamoo
Can any of the company-specific risk be diversified away by investing in both Hyundai Engineering and FoodNamoo 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 Hyundai Engineering and FoodNamoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Engineering Plastics and FoodNamoo, you can compare the effects of market volatilities on Hyundai Engineering and FoodNamoo 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 Hyundai Engineering with a short position of FoodNamoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Engineering and FoodNamoo.
Diversification Opportunities for Hyundai Engineering and FoodNamoo
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hyundai and FoodNamoo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Plastics and FoodNamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FoodNamoo and Hyundai 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 Hyundai Engineering Plastics are associated (or correlated) with FoodNamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FoodNamoo has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and FoodNamoo go up and down completely randomly.
Pair Corralation between Hyundai Engineering and FoodNamoo
Assuming the 90 days trading horizon Hyundai Engineering Plastics is expected to generate 0.46 times more return on investment than FoodNamoo. However, Hyundai Engineering Plastics is 2.19 times less risky than FoodNamoo. It trades about -0.01 of its potential returns per unit of risk. FoodNamoo is currently generating about -0.05 per unit of risk. If you would invest 397,832 in Hyundai Engineering Plastics on October 16, 2024 and sell it today you would lose (47,832) from holding Hyundai Engineering Plastics or give up 12.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.22% |
| Values | Daily Returns |
Hyundai Engineering Plastics vs. FoodNamoo
Performance |
| Timeline |
| Hyundai Engineering |
| FoodNamoo |
Hyundai Engineering and FoodNamoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai Engineering and FoodNamoo
The main advantage of trading using opposite Hyundai Engineering and FoodNamoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai Engineering position performs unexpectedly, FoodNamoo 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 FoodNamoo will offset losses from the drop in FoodNamoo's long position.The idea behind Hyundai Engineering Plastics and FoodNamoo 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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