Correlation Between Hyundai and Union Materials
Can any of the company-specific risk be diversified away by investing in both Hyundai and Union Materials 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 Union Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Union Materials Corp, you can compare the effects of market volatilities on Hyundai and Union Materials 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 Union Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Union Materials.
Diversification Opportunities for Hyundai and Union Materials
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hyundai and Union is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp 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 Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Hyundai i.e., Hyundai and Union Materials go up and down completely randomly.
Pair Corralation between Hyundai and Union Materials
Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.49 times more return on investment than Union Materials. However, Hyundai Motor is 2.03 times less risky than Union Materials. It trades about 0.05 of its potential returns per unit of risk. Union Materials Corp is currently generating about 0.01 per unit of risk. If you would invest 14,251,500 in Hyundai Motor on September 3, 2024 and sell it today you would earn a total of 7,598,500 from holding Hyundai Motor or generate 53.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Union Materials Corp
Performance |
| Timeline |
| Hyundai Motor |
| Union Materials Corp |
Hyundai and Union Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Union Materials
The main advantage of trading using opposite Hyundai and Union Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Union Materials 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 Union Materials will offset losses from the drop in Union Materials' long position.| Hyundai vs. Dongbu Insurance Co | Hyundai vs. Okins Electronics Co | Hyundai vs. Total Soft Bank | Hyundai vs. Samji Electronics Co |
| Union Materials vs. Korea Real Estate | Union Materials vs. Busan Industrial Co | Union Materials vs. UNISEM Co | Union Materials vs. RPBio Inc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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