Correlation Between Aurora World and Hyundai Heavy

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

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

Diversification Opportunities for Aurora World and Hyundai Heavy

0.71

Correlation Coefficient

Aurora World  Hyundai Heavy

Poor diversification

The 3 months correlation between Aurora and Hyundai is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aurora World 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 Aurora World 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 Aurora World 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 Aurora World i.e., Aurora World and Hyundai Heavy go up and down completely randomly.

Pair Corralation between Aurora World and Hyundai Heavy

Assuming the 90 days trading horizon Aurora World is expected to generate 4.8 times less return on investment than Hyundai Heavy. But when comparing it to its historical volatility, Aurora World is 2.04 times less risky than Hyundai Heavy. It trades about 0.1 of its potential returns per unit of risk. Hyundai Heavy Industries is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  18,720,000  in Hyundai Heavy Industries on September 27, 2024 and sell it today you would earn a total of  8,480,000  from holding Hyundai Heavy Industries or generate 45.3% return on investment over 90 days.

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

Aurora World  vs.  Hyundai Heavy Industries

Aurora World

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora World are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aurora World may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hyundai Heavy Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Heavy Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurora World and Hyundai Heavy

The main advantage of trading using opposite Aurora World and Hyundai Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora World 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 Aurora World 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.