Correlation Between Formetal and Hyundai Engineering
Can any of the company-specific risk be diversified away by investing in both Formetal and Hyundai Engineering 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 Formetal and Hyundai Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Hyundai Engineering Construction, you can compare the effects of market volatilities on Formetal and Hyundai Engineering 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 Formetal with a short position of Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Hyundai Engineering.
Diversification Opportunities for Formetal and Hyundai Engineering
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formetal and Hyundai is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Hyundai Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Formetal 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 Formetal Co are associated (or correlated) with Hyundai Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Engineering has no effect on the direction of Formetal i.e., Formetal and Hyundai Engineering go up and down completely randomly.
Pair Corralation between Formetal and Hyundai Engineering
Assuming the 90 days trading horizon Formetal Co is expected to generate 2.06 times more return on investment than Hyundai Engineering. However, Formetal is 2.06 times more volatile than Hyundai Engineering Construction. It trades about 0.23 of its potential returns per unit of risk. Hyundai Engineering Construction is currently generating about -0.17 per unit of risk. If you would invest 267,500 in Formetal Co on September 14, 2024 and sell it today you would earn a total of 71,000 from holding Formetal Co or generate 26.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. Hyundai Engineering Constructi
Performance |
| Timeline |
| Formetal |
| Hyundai Engineering |
Formetal and Hyundai Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Hyundai Engineering
The main advantage of trading using opposite Formetal and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Hyundai Engineering 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 Engineering will offset losses from the drop in Hyundai Engineering's long position.| Formetal vs. Rainbow Robotics | Formetal vs. COWINTECH Co | Formetal vs. CS BEARING CoLtd | Formetal vs. Young Poong Precision |
| Hyundai Engineering vs. Sempio Foods Co | Hyundai Engineering vs. Kumho Industrial Co | Hyundai Engineering vs. Formetal Co | Hyundai Engineering vs. Hyundai Green Food |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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