Correlation Between Cheryong Industrial and Hyundai Industrial
Can any of the company-specific risk be diversified away by investing in both Cheryong Industrial 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 Cheryong Industrial and Hyundai Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheryong Industrial CoLtd and Hyundai Industrial Co, you can compare the effects of market volatilities on Cheryong Industrial 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 Cheryong Industrial with a short position of Hyundai Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheryong Industrial and Hyundai Industrial.
Diversification Opportunities for Cheryong Industrial and Hyundai Industrial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cheryong and Hyundai is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Hyundai Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Industrial and Cheryong Industrial 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 Cheryong Industrial CoLtd 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 Cheryong Industrial i.e., Cheryong Industrial and Hyundai Industrial go up and down completely randomly.
Pair Corralation between Cheryong Industrial and Hyundai Industrial
Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to under-perform the Hyundai Industrial. In addition to that, Cheryong Industrial is 2.5 times more volatile than Hyundai Industrial Co. It trades about -0.16 of its total potential returns per unit of risk. Hyundai Industrial Co is currently generating about -0.16 per unit of volatility. If you would invest 533,000 in Hyundai Industrial Co on September 2, 2024 and sell it today you would lose (28,000) from holding Hyundai Industrial Co or give up 5.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheryong Industrial CoLtd vs. Hyundai Industrial Co
Performance |
| Timeline |
| Cheryong Industrial CoLtd |
| Hyundai Industrial |
Cheryong Industrial and Hyundai Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheryong Industrial and Hyundai Industrial
The main advantage of trading using opposite Cheryong Industrial and Hyundai Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheryong Industrial 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.| Cheryong Industrial vs. Nature and Environment | Cheryong Industrial vs. Busan Industrial Co | Cheryong Industrial vs. Busan Ind | Cheryong Industrial vs. Mirae Asset Daewoo |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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