Correlation Between Hyundai and Korea Air
Can any of the company-specific risk be diversified away by investing in both Hyundai and Korea Air 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 Korea Air 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 Korea Air Svc, you can compare the effects of market volatilities on Hyundai and Korea Air 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 Korea Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Korea Air.
Diversification Opportunities for Hyundai and Korea Air
Very good diversification
The 3 months correlation between Hyundai and Korea is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Korea Air Svc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Air Svc 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 Korea Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Air Svc has no effect on the direction of Hyundai i.e., Hyundai and Korea Air go up and down completely randomly.
Pair Corralation between Hyundai and Korea Air
Assuming the 90 days trading horizon Hyundai Motor Co is expected to under-perform the Korea Air. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor Co is 1.78 times less risky than Korea Air. The stock trades about -0.01 of its potential returns per unit of risk. The Korea Air Svc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 5,670,000 in Korea Air Svc on September 5, 2024 and sell it today you would earn a total of 400,000 from holding Korea Air Svc or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor Co vs. Korea Air Svc
Performance |
| Timeline |
| Hyundai Motor |
| Korea Air Svc |
Hyundai and Korea Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Korea Air
The main advantage of trading using opposite Hyundai and Korea Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Korea Air 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 Korea Air will offset losses from the drop in Korea Air's long position.| Hyundai vs. Daesung Hi Tech Co | Hyundai vs. Orbitech Co | Hyundai vs. CU Tech Corp | Hyundai vs. Iljin Display |
| Korea Air vs. LG Display | Korea Air vs. Hyundai Motor | Korea Air vs. Hyundai Motor Co | Korea Air vs. Hyundai Motor 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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