Correlation Between Hyundai and POSCO M
Can any of the company-specific risk be diversified away by investing in both Hyundai and POSCO M 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 and POSCO M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and POSCO M TECH Co, you can compare the effects of market volatilities on Hyundai and POSCO M 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 with a short position of POSCO M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and POSCO M.
Diversification Opportunities for Hyundai and POSCO M
Poor diversification
The 3 months correlation between Hyundai and POSCO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and POSCO M TECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO M TECH and Hyundai 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 Motor are associated (or correlated) with POSCO M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO M TECH has no effect on the direction of Hyundai i.e., Hyundai and POSCO M go up and down completely randomly.
Pair Corralation between Hyundai and POSCO M
Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.74 times more return on investment than POSCO M. However, Hyundai Motor is 1.36 times less risky than POSCO M. It trades about 0.04 of its potential returns per unit of risk. POSCO M TECH Co is currently generating about -0.22 per unit of risk. If you would invest 21,500,000 in Hyundai Motor on September 1, 2024 and sell it today you would earn a total of 350,000 from holding Hyundai Motor or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. POSCO M TECH Co
Performance |
| Timeline |
| Hyundai Motor |
| POSCO M TECH |
Hyundai and POSCO M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and POSCO M
The main advantage of trading using opposite Hyundai and POSCO M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, POSCO M 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 POSCO M will offset losses from the drop in POSCO M's long position.| Hyundai vs. LG Display | Hyundai vs. Hyundai Motor Co | Hyundai vs. Hyundai Motor Co | Hyundai vs. Adaptive Plasma Technology |
| POSCO M vs. LG Chemicals | POSCO M vs. POSCO Holdings | POSCO M vs. Hanwha Solutions | POSCO M vs. Hyundai Steel |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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