Correlation Between Hyundai and Ray
Can any of the company-specific risk be diversified away by investing in both Hyundai and Ray 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 Ray into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Ray Co, you can compare the effects of market volatilities on Hyundai and Ray 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 Ray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Ray.
Diversification Opportunities for Hyundai and Ray
Poor diversification
The 3 months correlation between Hyundai and Ray is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Ray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ray 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 Ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ray Co has no effect on the direction of Hyundai i.e., Hyundai and Ray go up and down completely randomly.
Pair Corralation between Hyundai and Ray
Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.66 times more return on investment than Ray. However, Hyundai Motor is 1.52 times less risky than Ray. It trades about 0.03 of its potential returns per unit of risk. Ray Co is currently generating about -0.47 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Ray Co
Performance |
| Timeline |
| Hyundai Motor |
| Ray Co |
Hyundai and Ray Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Ray
The main advantage of trading using opposite Hyundai and Ray positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Ray 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 Ray will offset losses from the drop in Ray's long position.| Hyundai vs. Dongbu Insurance Co | Hyundai vs. Okins Electronics Co | Hyundai vs. Total Soft Bank | Hyundai vs. Samji Electronics Co |
| Ray vs. Wonil Special Steel | Ray vs. Korea Petro Chemical | Ray vs. JC Chemical Co | Ray vs. Namhae Chemical |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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