Correlation Between Hyosung Heavy and Daesung Hi

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

Diversification Opportunities for Hyosung Heavy and Daesung Hi

-0.29

Correlation Coefficient

Hyosung Heavy  Daesung Hi

Very good diversification

The 3 months correlation between Hyosung and Daesung is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hyosung Heavy Industries and Daesung Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Hi Tech 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 Daesung Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Hi Tech has no effect on the direction of Hyosung Heavy i.e., Hyosung Heavy and Daesung Hi go up and down completely randomly.

Pair Corralation between Hyosung Heavy and Daesung Hi

Assuming the 90 days trading horizon Hyosung Heavy Industries is expected to generate 1.38 times more return on investment than Daesung Hi. However, Hyosung Heavy is 1.38 times more volatile than Daesung Hi Tech Co. It trades about 0.17 of its potential returns per unit of risk. Daesung Hi Tech Co is currently generating about -0.06 per unit of risk. If you would invest  28,400,000  in Hyosung Heavy Industries on August 31, 2024 and sell it today you would earn a total of  11,250,000  from holding Hyosung Heavy Industries or generate 39.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Hyosung Heavy Industries  vs.  Daesung Hi Tech Co

Hyosung Heavy Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyosung Heavy Industries are ranked lower than 13 (%) 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.

Daesung Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daesung Hi Tech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hyosung Heavy and Daesung Hi

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

The idea behind Hyosung Heavy Industries and Daesung Hi Tech 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..