Correlation Between Hyundai Heavy and Oriental Precision
Can any of the company-specific risk be diversified away by investing in both Hyundai Heavy and Oriental Precision 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 Heavy and Oriental Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Heavy Industries and Oriental Precision Engineering, you can compare the effects of market volatilities on Hyundai Heavy and Oriental Precision 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 Heavy with a short position of Oriental Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai Heavy and Oriental Precision.
Diversification Opportunities for Hyundai Heavy and Oriental Precision
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hyundai and Oriental is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Heavy Industries and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Hyundai Heavy 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 Heavy Industries are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Hyundai Heavy i.e., Hyundai Heavy and Oriental Precision go up and down completely randomly.
Pair Corralation between Hyundai Heavy and Oriental Precision
Assuming the 90 days trading horizon Hyundai Heavy is expected to generate 1.91 times less return on investment than Oriental Precision. But when comparing it to its historical volatility, Hyundai Heavy Industries is 1.6 times less risky than Oriental Precision. It trades about 0.06 of its potential returns per unit of risk. Oriental Precision Engineering is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 258,870 in Oriental Precision Engineering on October 29, 2024 and sell it today you would earn a total of 314,130 from holding Oriental Precision Engineering or generate 121.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Heavy Industries vs. Oriental Precision Engineering
Performance |
| Timeline |
| Hyundai Heavy Industries |
| Oriental Precision |
Hyundai Heavy and Oriental Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai Heavy and Oriental Precision
The main advantage of trading using opposite Hyundai Heavy and Oriental Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai Heavy position performs unexpectedly, Oriental Precision 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 Oriental Precision will offset losses from the drop in Oriental Precision's long position.The idea behind Hyundai Heavy Industries and Oriental Precision Engineering 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.| Oriental Precision vs. SEOJEON ELECTRIC MACHINERY | Oriental Precision vs. Hyundai Engineering Construction | Oriental Precision vs. Dongbang Ship Machinery | Oriental Precision vs. Seoul Food Industrial |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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