Correlation Between Daelim Industrial and Hyundai Steel

Can any of the company-specific risk be diversified away by investing in both Daelim Industrial and Hyundai Steel 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 Daelim Industrial and Hyundai Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daelim Industrial Co and Hyundai Steel, you can compare the effects of market volatilities on Daelim Industrial and Hyundai Steel 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 Daelim Industrial with a short position of Hyundai Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daelim Industrial and Hyundai Steel.

Diversification Opportunities for Daelim Industrial and Hyundai Steel

0.91

Correlation Coefficient

Daelim Industrial  Hyundai Steel

Almost no diversification

The 3 months correlation between Daelim and Hyundai is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Daelim Industrial Co and Hyundai Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Steel and Daelim 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 Daelim Industrial Co are associated (or correlated) with Hyundai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Steel has no effect on the direction of Daelim Industrial i.e., Daelim Industrial and Hyundai Steel go up and down completely randomly.

Pair Corralation between Daelim Industrial and Hyundai Steel

Assuming the 90 days trading horizon Daelim Industrial Co is expected to under-perform the Hyundai Steel. But the stock apears to be less risky and, when comparing its historical volatility, Daelim Industrial Co is 1.59 times less risky than Hyundai Steel. The stock trades about -0.11 of its potential returns per unit of risk. The Hyundai Steel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,380,000  in Hyundai Steel on September 12, 2024 and sell it today you would lose (110,000) from holding Hyundai Steel or give up 4.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Daelim Industrial Co  vs.  Hyundai Steel

Daelim Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daelim Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hyundai Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hyundai Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daelim Industrial and Hyundai Steel

The main advantage of trading using opposite Daelim Industrial and Hyundai Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daelim Industrial position performs unexpectedly, Hyundai Steel 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 Steel will offset losses from the drop in Hyundai Steel's long position.

The idea behind Daelim Industrial Co and Hyundai Steel 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.