Correlation Between Hyundai and Nam Hwa
Can any of the company-specific risk be diversified away by investing in both Hyundai and Nam Hwa 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 Nam Hwa 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 Nam Hwa Construction, you can compare the effects of market volatilities on Hyundai and Nam Hwa 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 Nam Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Nam Hwa.
Diversification Opportunities for Hyundai and Nam Hwa
Average diversification
The 3 months correlation between Hyundai and Nam is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Nam Hwa Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Hwa Construction 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 Nam Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Hwa Construction has no effect on the direction of Hyundai i.e., Hyundai and Nam Hwa go up and down completely randomly.
Pair Corralation between Hyundai and Nam Hwa
Assuming the 90 days trading horizon Hyundai Motor Co is expected to generate 0.89 times more return on investment than Nam Hwa. However, Hyundai Motor Co is 1.12 times less risky than Nam Hwa. It trades about 0.02 of its potential returns per unit of risk. Nam Hwa Construction is currently generating about -0.02 per unit of risk. If you would invest 15,211,200 in Hyundai Motor Co on September 3, 2024 and sell it today you would earn a total of 488,800 from holding Hyundai Motor Co or generate 3.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor Co vs. Nam Hwa Construction
Performance |
| Timeline |
| Hyundai Motor |
| Nam Hwa Construction |
Hyundai and Nam Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Nam Hwa
The main advantage of trading using opposite Hyundai and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Nam Hwa 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 Nam Hwa will offset losses from the drop in Nam Hwa's long position.| Hyundai vs. NewFlex Technology Co | Hyundai vs. KG Eco Technology | Hyundai vs. Solution Advanced Technology | Hyundai vs. iNtRON Biotechnology |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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