Correlation Between Hyundai and Sang A
Can any of the company-specific risk be diversified away by investing in both Hyundai and Sang A 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 Sang A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Sang A Frontec CoLtd, you can compare the effects of market volatilities on Hyundai and Sang A 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 Sang A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Sang A.
Diversification Opportunities for Hyundai and Sang A
Very poor diversification
The 3 months correlation between Hyundai and Sang is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Sang A Frontec CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sang A Frontec 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 Sang A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sang A Frontec has no effect on the direction of Hyundai i.e., Hyundai and Sang A go up and down completely randomly.
Pair Corralation between Hyundai and Sang A
Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the Sang A. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 1.55 times less risky than Sang A. The stock trades about -0.03 of its potential returns per unit of risk. The Sang A Frontec CoLtd is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,860,000 in Sang A Frontec CoLtd on September 20, 2024 and sell it today you would earn a total of 92,000 from holding Sang A Frontec CoLtd or generate 4.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Sang A Frontec CoLtd
Performance |
| Timeline |
| Hyundai Motor |
| Sang A Frontec |
Hyundai and Sang A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Sang A
The main advantage of trading using opposite Hyundai and Sang A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Sang A 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 Sang A will offset losses from the drop in Sang A's long position.| Hyundai vs. Han Kook Steel | Hyundai vs. Cots Technology Co | Hyundai vs. Ni Steel | Hyundai vs. ENF Technology Co |
| Sang A vs. Digital Imaging Technology | Sang A vs. Polaris Office Corp | Sang A vs. Eagle Veterinary Technology | Sang A vs. Eugene Technology CoLtd |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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