Correlation Between Daewoo SBI and Hyundai Engineering
Can any of the company-specific risk be diversified away by investing in both Daewoo SBI 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 Daewoo SBI and Hyundai Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewoo SBI SPAC and Hyundai Engineering Plastics, you can compare the effects of market volatilities on Daewoo SBI 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 Daewoo SBI with a short position of Hyundai Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo SBI and Hyundai Engineering.
Diversification Opportunities for Daewoo SBI and Hyundai Engineering
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Daewoo and Hyundai is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo SBI SPAC and Hyundai Engineering Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Engineering and Daewoo SBI 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 SBI SPAC 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 Daewoo SBI i.e., Daewoo SBI and Hyundai Engineering go up and down completely randomly.
Pair Corralation between Daewoo SBI and Hyundai Engineering
Assuming the 90 days trading horizon Daewoo SBI SPAC is expected to under-perform the Hyundai Engineering. In addition to that, Daewoo SBI is 1.07 times more volatile than Hyundai Engineering Plastics. It trades about -0.07 of its total potential returns per unit of risk. Hyundai Engineering Plastics is currently generating about 0.0 per unit of volatility. If you would invest 400,250 in Hyundai Engineering Plastics on August 25, 2024 and sell it today you would lose (38,250) from holding Hyundai Engineering Plastics or give up 9.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daewoo SBI SPAC vs. Hyundai Engineering Plastics
Performance |
| Timeline |
| Daewoo SBI SPAC |
| Hyundai Engineering |
Daewoo SBI and Hyundai Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewoo SBI and Hyundai Engineering
The main advantage of trading using opposite Daewoo SBI and Hyundai Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewoo SBI 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.| Daewoo SBI vs. Deutsch Motors | Daewoo SBI vs. Hanjinkal | Daewoo SBI vs. Busan Industrial Co | Daewoo SBI vs. Busan Ind |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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