Correlation Between Hyundai and LegoChem Biosciences
Can any of the company-specific risk be diversified away by investing in both Hyundai and LegoChem Biosciences 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 LegoChem Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and LegoChem Biosciences, you can compare the effects of market volatilities on Hyundai and LegoChem Biosciences 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 LegoChem Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and LegoChem Biosciences.
Diversification Opportunities for Hyundai and LegoChem Biosciences
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hyundai and LegoChem is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and LegoChem Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LegoChem Biosciences 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 LegoChem Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LegoChem Biosciences has no effect on the direction of Hyundai i.e., Hyundai and LegoChem Biosciences go up and down completely randomly.
Pair Corralation between Hyundai and LegoChem Biosciences
Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the LegoChem Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 1.65 times less risky than LegoChem Biosciences. The stock trades about -0.08 of its potential returns per unit of risk. The LegoChem Biosciences is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 10,900,000 in LegoChem Biosciences on November 30, 2024 and sell it today you would earn a total of 100,000 from holding LegoChem Biosciences or generate 0.92% 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. LegoChem Biosciences
Performance |
| Timeline |
| Hyundai Motor |
| LegoChem Biosciences |
Hyundai and LegoChem Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and LegoChem Biosciences
The main advantage of trading using opposite Hyundai and LegoChem Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, LegoChem Biosciences 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 LegoChem Biosciences will offset losses from the drop in LegoChem Biosciences' long position.The idea behind Hyundai Motor and LegoChem Biosciences pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| LegoChem Biosciences vs. EBEST Investment Securities | LegoChem Biosciences vs. Samyung Trading Co | LegoChem Biosciences vs. DB Financial Investment | LegoChem Biosciences vs. Sempio Foods 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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |