Correlation Between SBI Investment and Hyundai Heavy

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

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

Diversification Opportunities for SBI Investment and Hyundai Heavy

0.1

Correlation Coefficient

SBI Investment  Hyundai Heavy

Average diversification

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

Pair Corralation between SBI Investment and Hyundai Heavy

Assuming the 90 days trading horizon SBI Investment KOREA is expected to generate 2.0 times more return on investment than Hyundai Heavy. However, SBI Investment is 2.0 times more volatile than Hyundai Heavy Industries. It trades about 0.03 of its potential returns per unit of risk. Hyundai Heavy Industries is currently generating about 0.02 per unit of risk. If you would invest  73,400  in SBI Investment KOREA on September 12, 2024 and sell it today you would earn a total of  2,500  from holding SBI Investment KOREA or generate 3.41% return on investment over 90 days.

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

SBI Investment KOREA  vs.  Hyundai Heavy Industries

SBI Investment KOREA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hyundai Heavy Industries

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with SBI Investment and Hyundai Heavy

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

The idea behind SBI Investment KOREA and Hyundai 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.