Correlation Between Hyundai and SNTEnergy
Can any of the company-specific risk be diversified away by investing in both Hyundai and SNTEnergy 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 SNTEnergy 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 SNTEnergy Co, you can compare the effects of market volatilities on Hyundai and SNTEnergy 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 SNTEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and SNTEnergy.
Diversification Opportunities for Hyundai and SNTEnergy
Excellent diversification
The 3 months correlation between Hyundai and SNTEnergy is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and SNTEnergy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNTEnergy 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 SNTEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNTEnergy has no effect on the direction of Hyundai i.e., Hyundai and SNTEnergy go up and down completely randomly.
Pair Corralation between Hyundai and SNTEnergy
Assuming the 90 days trading horizon Hyundai Motor Co is expected to under-perform the SNTEnergy. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor Co is 3.61 times less risky than SNTEnergy. The stock trades about -0.03 of its potential returns per unit of risk. The SNTEnergy Co is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,292,000 in SNTEnergy Co on September 4, 2024 and sell it today you would earn a total of 515,000 from holding SNTEnergy Co or generate 39.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor Co vs. SNTEnergy Co
Performance |
| Timeline |
| Hyundai Motor |
| SNTEnergy |
Hyundai and SNTEnergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and SNTEnergy
The main advantage of trading using opposite Hyundai and SNTEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, SNTEnergy 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 SNTEnergy will offset losses from the drop in SNTEnergy's long position.The idea behind Hyundai Motor Co and SNTEnergy 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.| SNTEnergy vs. Doosan Heavy Ind | SNTEnergy vs. Korea Refract | SNTEnergy vs. Busan Industrial Co | SNTEnergy vs. Busan Ind |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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