Correlation Between Bohae Brewery and Hyosung Heavy

Can any of the company-specific risk be diversified away by investing in both Bohae Brewery and Hyosung Heavy 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 Bohae Brewery and Hyosung Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bohae Brewery and Hyosung Heavy Industries, you can compare the effects of market volatilities on Bohae Brewery and Hyosung Heavy 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 Bohae Brewery with a short position of Hyosung Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bohae Brewery and Hyosung Heavy.

Diversification Opportunities for Bohae Brewery and Hyosung Heavy

-0.1

Correlation Coefficient

Bohae Brewery  Hyosung Heavy

Good diversification

The 3 months correlation between Bohae and Hyosung is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bohae Brewery and Hyosung Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Heavy Industries and Bohae Brewery 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 Bohae Brewery are associated (or correlated) with Hyosung Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Heavy Industries has no effect on the direction of Bohae Brewery i.e., Bohae Brewery and Hyosung Heavy go up and down completely randomly.

Pair Corralation between Bohae Brewery and Hyosung Heavy

Assuming the 90 days trading horizon Bohae Brewery is expected to generate 3.63 times less return on investment than Hyosung Heavy. In addition to that, Bohae Brewery is 1.23 times more volatile than Hyosung Heavy Industries. It trades about 0.04 of its total potential returns per unit of risk. Hyosung Heavy Industries is currently generating about 0.17 per unit of volatility. If you would invest  28,600,000  in Hyosung Heavy Industries on September 3, 2024 and sell it today you would earn a total of  11,750,000  from holding Hyosung Heavy Industries or generate 41.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bohae Brewery  vs.  Hyosung Heavy Industries

Bohae Brewery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bohae Brewery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bohae Brewery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hyosung Heavy Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyosung Heavy Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyosung Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bohae Brewery and Hyosung Heavy

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

The idea behind Bohae Brewery and Hyosung Heavy Industries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.