Correlation Between Hyundai and Daedong Gear
Can any of the company-specific risk be diversified away by investing in both Hyundai and Daedong Gear 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 Daedong Gear 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 Daedong Gear Co, you can compare the effects of market volatilities on Hyundai and Daedong Gear 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 Daedong Gear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Daedong Gear.
Diversification Opportunities for Hyundai and Daedong Gear
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hyundai and Daedong is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Daedong Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Gear 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 Daedong Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Gear has no effect on the direction of Hyundai i.e., Hyundai and Daedong Gear go up and down completely randomly.
Pair Corralation between Hyundai and Daedong Gear
Assuming the 90 days trading horizon Hyundai Motor Co is expected to under-perform the Daedong Gear. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor Co is 5.85 times less risky than Daedong Gear. The stock trades about -0.03 of its potential returns per unit of risk. The Daedong Gear Co is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 800,000 in Daedong Gear Co on September 4, 2024 and sell it today you would earn a total of 563,000 from holding Daedong Gear Co or generate 70.38% 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. Daedong Gear Co
Performance |
| Timeline |
| Hyundai Motor |
| Daedong Gear |
Hyundai and Daedong Gear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Daedong Gear
The main advantage of trading using opposite Hyundai and Daedong Gear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Daedong Gear 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 Daedong Gear will offset losses from the drop in Daedong Gear's long position.The idea behind Hyundai Motor Co and Daedong Gear Co 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.| Daedong Gear vs. Daou Data Corp | Daedong Gear vs. Ssangyong Information Communication | Daedong Gear vs. Sung Bo Chemicals | Daedong Gear vs. DataSolution |
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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