Correlation Between Hyosung Heavy and System

Can any of the company-specific risk be diversified away by investing in both Hyosung Heavy and System 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 System 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 System and Application, you can compare the effects of market volatilities on Hyosung Heavy and System 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 System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyosung Heavy and System.

Diversification Opportunities for Hyosung Heavy and System

-0.83

Correlation Coefficient

Hyosung Heavy  System

Pay attention - limited upside

The 3 months correlation between Hyosung and System is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hyosung Heavy Industries and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application 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 System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of Hyosung Heavy i.e., Hyosung Heavy and System go up and down completely randomly.

Pair Corralation between Hyosung Heavy and System

Assuming the 90 days trading horizon Hyosung Heavy Industries is expected to generate 1.79 times more return on investment than System. However, Hyosung Heavy is 1.79 times more volatile than System and Application. It trades about 0.18 of its potential returns per unit of risk. System and Application is currently generating about -0.12 per unit of risk. If you would invest  27,000,000  in Hyosung Heavy Industries on September 4, 2024 and sell it today you would earn a total of  11,600,000  from holding Hyosung Heavy Industries or generate 42.96% return on investment over 90 days.

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

Hyosung Heavy Industries  vs.  System and Application

Hyosung Heavy Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyosung Heavy Industries are ranked lower than 14 (%) 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.

System and Application

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days System and Application 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 Hyosung Heavy and System

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

The idea behind Hyosung Heavy Industries and System and Application 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.