Correlation Between Kumho Industrial and SK Hynix

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

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

Diversification Opportunities for Kumho Industrial and SK Hynix

-0.36

Correlation Coefficient

Kumho Industrial  SK Hynix

Very good diversification

The 3 months correlation between Kumho and 000660 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kumho Industrial Co and SK Hynix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Hynix and Kumho 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 Kumho Industrial Co are associated (or correlated) with SK Hynix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Hynix has no effect on the direction of Kumho Industrial i.e., Kumho Industrial and SK Hynix go up and down completely randomly.

Pair Corralation between Kumho Industrial and SK Hynix

Assuming the 90 days trading horizon Kumho Industrial Co is expected to under-perform the SK Hynix. But the stock apears to be less risky and, when comparing its historical volatility, Kumho Industrial Co is 1.24 times less risky than SK Hynix. The stock trades about -0.09 of its potential returns per unit of risk. The SK Hynix is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  16,852,000  in SK Hynix on September 12, 2024 and sell it today you would earn a total of  188,000  from holding SK Hynix or generate 1.12% return on investment over 90 days.

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

Kumho Industrial Co  vs.  SK Hynix

Kumho Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumho 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.

SK Hynix

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SK Hynix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kumho Industrial and SK Hynix

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

The idea behind Kumho Industrial Co and SK Hynix 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.