Correlation Between Hyundai and Posco Chemical
Can any of the company-specific risk be diversified away by investing in both Hyundai and Posco Chemical 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 Posco Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor Co and Posco Chemical Co, you can compare the effects of market volatilities on Hyundai and Posco Chemical 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 Posco Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Posco Chemical.
Diversification Opportunities for Hyundai and Posco Chemical
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hyundai and Posco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Posco Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posco Chemical 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 Co are associated (or correlated) with Posco Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posco Chemical has no effect on the direction of Hyundai i.e., Hyundai and Posco Chemical go up and down completely randomly.
Pair Corralation between Hyundai and Posco Chemical
Assuming the 90 days trading horizon Hyundai Motor Co is expected to generate 0.42 times more return on investment than Posco Chemical. However, Hyundai Motor Co is 2.39 times less risky than Posco Chemical. It trades about -0.15 of its potential returns per unit of risk. Posco Chemical Co is currently generating about -0.21 per unit of risk. If you would invest 17,370,000 in Hyundai Motor Co on September 13, 2024 and sell it today you would lose (1,780,000) from holding Hyundai Motor Co or give up 10.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor Co vs. Posco Chemical Co
Performance |
| Timeline |
| Hyundai Motor |
| Posco Chemical |
Hyundai and Posco Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Posco Chemical
The main advantage of trading using opposite Hyundai and Posco Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Posco Chemical 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 Posco Chemical will offset losses from the drop in Posco Chemical's long position.| Hyundai vs. Hyundai Motor Co | Hyundai vs. Solution Advanced Technology | Hyundai vs. Busan Industrial Co | Hyundai vs. Busan Ind |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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