Correlation Between Hyundai and UIL
Can any of the company-specific risk be diversified away by investing in both Hyundai and UIL 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 UIL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and UIL Co, you can compare the effects of market volatilities on Hyundai and UIL 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 UIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and UIL.
Diversification Opportunities for Hyundai and UIL
Poor diversification
The 3 months correlation between Hyundai and UIL is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and UIL Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UIL Co 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 UIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UIL Co has no effect on the direction of Hyundai i.e., Hyundai and UIL go up and down completely randomly.
Pair Corralation between Hyundai and UIL
Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the UIL. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 1.47 times less risky than UIL. The stock trades about -0.17 of its potential returns per unit of risk. The UIL Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 512,000 in UIL Co on September 13, 2024 and sell it today you would earn a total of 5,000 from holding UIL Co or generate 0.98% 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. UIL Co
Performance |
| Timeline |
| Hyundai Motor |
| UIL Co |
Hyundai and UIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and UIL
The main advantage of trading using opposite Hyundai and UIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, UIL 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 UIL will offset losses from the drop in UIL's long position.| Hyundai vs. Daou Data Corp | Hyundai vs. Solution Advanced Technology | Hyundai vs. Busan Industrial Co | Hyundai vs. Busan Ind |
| UIL vs. Kbi Metal Co | UIL vs. KakaoBank Corp | UIL vs. Lotte Non Life Insurance | UIL vs. iNtRON Biotechnology |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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