Correlation Between Hyundai and Geumhwa Plant
Can any of the company-specific risk be diversified away by investing in both Hyundai and Geumhwa Plant 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 Geumhwa Plant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Geumhwa Plant Service, you can compare the effects of market volatilities on Hyundai and Geumhwa Plant 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 Geumhwa Plant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Geumhwa Plant.
Diversification Opportunities for Hyundai and Geumhwa Plant
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hyundai and Geumhwa is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Geumhwa Plant Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geumhwa Plant Service 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 Geumhwa Plant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geumhwa Plant Service has no effect on the direction of Hyundai i.e., Hyundai and Geumhwa Plant go up and down completely randomly.
Pair Corralation between Hyundai and Geumhwa Plant
Assuming the 90 days trading horizon Hyundai Motor is expected to generate 1.69 times more return on investment than Geumhwa Plant. However, Hyundai is 1.69 times more volatile than Geumhwa Plant Service. It trades about 0.03 of its potential returns per unit of risk. Geumhwa Plant Service is currently generating about -0.31 per unit of risk. If you would invest 21,650,000 in Hyundai Motor on September 3, 2024 and sell it today you would earn a total of 200,000 from holding Hyundai Motor or generate 0.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Geumhwa Plant Service
Performance |
| Timeline |
| Hyundai Motor |
| Geumhwa Plant Service |
Hyundai and Geumhwa Plant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Geumhwa Plant
The main advantage of trading using opposite Hyundai and Geumhwa Plant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Geumhwa Plant 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 Geumhwa Plant will offset losses from the drop in Geumhwa Plant's long position.| Hyundai vs. Dongbu Insurance Co | Hyundai vs. Okins Electronics Co | Hyundai vs. Total Soft Bank | Hyundai vs. Samji Electronics Co |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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