Correlation Between Heungkuk Metaltech and ENERGYMACHINERY KOREA

Can any of the company-specific risk be diversified away by investing in both Heungkuk Metaltech and ENERGYMACHINERY KOREA 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 Heungkuk Metaltech and ENERGYMACHINERY KOREA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heungkuk Metaltech CoLtd and ENERGYMACHINERY KOREA CoLtd, you can compare the effects of market volatilities on Heungkuk Metaltech and ENERGYMACHINERY KOREA 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 Heungkuk Metaltech with a short position of ENERGYMACHINERY KOREA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heungkuk Metaltech and ENERGYMACHINERY KOREA.

Diversification Opportunities for Heungkuk Metaltech and ENERGYMACHINERY KOREA

-0.25

Correlation Coefficient

Heungkuk Metaltech  ENERGYMACHINERY KOREA

Very good diversification

The 3 months correlation between Heungkuk and ENERGYMACHINERY is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Heungkuk Metaltech CoLtd and ENERGYMACHINERY KOREA CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENERGYMACHINERY KOREA and Heungkuk Metaltech 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 Heungkuk Metaltech CoLtd are associated (or correlated) with ENERGYMACHINERY KOREA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENERGYMACHINERY KOREA has no effect on the direction of Heungkuk Metaltech i.e., Heungkuk Metaltech and ENERGYMACHINERY KOREA go up and down completely randomly.

Pair Corralation between Heungkuk Metaltech and ENERGYMACHINERY KOREA

Assuming the 90 days trading horizon Heungkuk Metaltech CoLtd is expected to generate 0.65 times more return on investment than ENERGYMACHINERY KOREA. However, Heungkuk Metaltech CoLtd is 1.53 times less risky than ENERGYMACHINERY KOREA. It trades about 0.16 of its potential returns per unit of risk. ENERGYMACHINERY KOREA CoLtd is currently generating about -0.1 per unit of risk. If you would invest  471,500  in Heungkuk Metaltech CoLtd on September 12, 2024 and sell it today you would earn a total of  91,500  from holding Heungkuk Metaltech CoLtd or generate 19.41% return on investment over 90 days.

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

Heungkuk Metaltech CoLtd  vs.  ENERGYMACHINERY KOREA CoLtd

Heungkuk Metaltech CoLtd

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heungkuk Metaltech CoLtd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Heungkuk Metaltech sustained solid returns over the last few months and may actually be approaching a breakup point.

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENERGYMACHINERY KOREA CoLtd 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.

Pair Trading with Heungkuk Metaltech and ENERGYMACHINERY KOREA

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

The idea behind Heungkuk Metaltech CoLtd and ENERGYMACHINERY KOREA CoLtd 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 Stocks Directory module to find actively traded stocks across global markets.