Correlation Between SK Chemicals and Hyundai Industrial
Can any of the company-specific risk be diversified away by investing in both SK Chemicals 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 SK Chemicals and Hyundai Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SK Chemicals Co and Hyundai Industrial Co, you can compare the effects of market volatilities on SK Chemicals 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 SK Chemicals with a short position of Hyundai Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Chemicals and Hyundai Industrial.
Diversification Opportunities for SK Chemicals and Hyundai Industrial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 28513K and Hyundai is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and Hyundai Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Industrial and SK Chemicals 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 SK Chemicals Co 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 SK Chemicals i.e., SK Chemicals and Hyundai Industrial go up and down completely randomly.
Pair Corralation between SK Chemicals and Hyundai Industrial
Assuming the 90 days trading horizon SK Chemicals Co is expected to generate 0.57 times more return on investment than Hyundai Industrial. However, SK Chemicals Co is 1.74 times less risky than Hyundai Industrial. It trades about -0.15 of its potential returns per unit of risk. Hyundai Industrial Co is currently generating about -0.09 per unit of risk. If you would invest 2,678,716 in SK Chemicals Co on September 3, 2024 and sell it today you would lose (726,716) from holding SK Chemicals Co or give up 27.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SK Chemicals Co vs. Hyundai Industrial Co
Performance |
| Timeline |
| SK Chemicals |
| Hyundai Industrial |
SK Chemicals and Hyundai Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SK Chemicals and Hyundai Industrial
The main advantage of trading using opposite SK Chemicals and Hyundai Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Chemicals 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.The idea behind SK Chemicals Co and Hyundai Industrial Co 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.| Hyundai Industrial vs. SK Chemicals Co | Hyundai Industrial vs. Hannong Chemicals | Hyundai Industrial vs. Dongwon Metal Co | Hyundai Industrial vs. Youngsin Metal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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