Correlation Between Hyundai and DHP Korea
Can any of the company-specific risk be diversified away by investing in both Hyundai and DHP Korea 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 DHP Korea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and DHP Korea Co, you can compare the effects of market volatilities on Hyundai and DHP Korea 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 DHP Korea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and DHP Korea.
Diversification Opportunities for Hyundai and DHP Korea
Very poor diversification
The 3 months correlation between Hyundai and DHP is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and DHP Korea Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHP Korea 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 DHP Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHP Korea has no effect on the direction of Hyundai i.e., Hyundai and DHP Korea go up and down completely randomly.
Pair Corralation between Hyundai and DHP Korea
Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.87 times more return on investment than DHP Korea. However, Hyundai Motor is 1.15 times less risky than DHP Korea. It trades about 0.03 of its potential returns per unit of risk. DHP Korea Co is currently generating about -0.36 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. DHP Korea Co
Performance |
| Timeline |
| Hyundai Motor |
| DHP Korea |
Hyundai and DHP Korea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and DHP Korea
The main advantage of trading using opposite Hyundai and DHP Korea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, DHP Korea 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 DHP Korea will offset losses from the drop in DHP Korea's long position.| Hyundai vs. Dongbu Insurance Co | Hyundai vs. Okins Electronics Co | Hyundai vs. Total Soft Bank | Hyundai vs. Samji Electronics Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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