Correlation Between Hyosung Heavy and Shinsegae Information

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

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

Diversification Opportunities for Hyosung Heavy and Shinsegae Information

0.06

Correlation Coefficient

Hyosung Heavy  Shinsegae Information

Significant diversification

The 3 months correlation between Hyosung and Shinsegae is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hyosung Heavy Industries and Shinsegae Information Communic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Information and Hyosung Heavy 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 Hyosung Heavy Industries are associated (or correlated) with Shinsegae Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Information has no effect on the direction of Hyosung Heavy i.e., Hyosung Heavy and Shinsegae Information go up and down completely randomly.

Pair Corralation between Hyosung Heavy and Shinsegae Information

Assuming the 90 days trading horizon Hyosung Heavy Industries is expected to generate 2.36 times more return on investment than Shinsegae Information. However, Hyosung Heavy is 2.36 times more volatile than Shinsegae Information Communication. It trades about 0.24 of its potential returns per unit of risk. Shinsegae Information Communication is currently generating about -0.03 per unit of risk. If you would invest  25,700,000  in Hyosung Heavy Industries on September 5, 2024 and sell it today you would earn a total of  16,750,000  from holding Hyosung Heavy Industries or generate 65.18% return on investment over 90 days.

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

Hyosung Heavy Industries  vs.  Shinsegae Information Communic

Hyosung Heavy Industries

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hyosung Heavy Industries are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyosung Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Shinsegae Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinsegae Information Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinsegae Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hyosung Heavy and Shinsegae Information

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

The idea behind Hyosung Heavy Industries and Shinsegae Information Communication 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.