Correlation Between Hyundai Industrial and Namhwa Industrial

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

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

Diversification Opportunities for Hyundai Industrial and Namhwa Industrial

-0.82

Correlation Coefficient

Hyundai Industrial  Namhwa Industrial

Pay attention - limited upside

The 3 months correlation between Hyundai and Namhwa is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Industrial Co and Namhwa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhwa Industrial and Hyundai 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 Hyundai Industrial Co are associated (or correlated) with Namhwa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhwa Industrial has no effect on the direction of Hyundai Industrial i.e., Hyundai Industrial and Namhwa Industrial go up and down completely randomly.

Pair Corralation between Hyundai Industrial and Namhwa Industrial

Assuming the 90 days trading horizon Hyundai Industrial Co is expected to under-perform the Namhwa Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Industrial Co is 1.34 times less risky than Namhwa Industrial. The stock trades about -0.16 of its potential returns per unit of risk. The Namhwa Industrial Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  545,000  in Namhwa Industrial Co on September 1, 2024 and sell it today you would lose (21,000) from holding Namhwa Industrial Co or give up 3.85% of portfolio value over 90 days.

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

Hyundai Industrial Co  vs.  Namhwa Industrial Co

Hyundai Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Namhwa Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namhwa Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namhwa Industrial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Hyundai Industrial and Namhwa Industrial

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

The idea behind Hyundai Industrial Co and Namhwa Industrial Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.