Correlation Between Hyundai and Korean Air
Can any of the company-specific risk be diversified away by investing in both Hyundai and Korean 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 Korean 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 Korean Air Lines, you can compare the effects of market volatilities on Hyundai and Korean 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 Korean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Korean Air.
Diversification Opportunities for Hyundai and Korean Air
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hyundai and Korean is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Korean Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Air Lines 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 Korean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Air Lines has no effect on the direction of Hyundai i.e., Hyundai and Korean Air go up and down completely randomly.
Pair Corralation between Hyundai and Korean Air
Assuming the 90 days trading horizon Hyundai Motor Co is expected to generate 1.72 times more return on investment than Korean Air. However, Hyundai is 1.72 times more volatile than Korean Air Lines. It trades about 0.02 of its potential returns per unit of risk. Korean Air Lines is currently generating about 0.03 per unit of risk. If you would invest 15,519,800 in Hyundai Motor Co on August 27, 2024 and sell it today you would earn a total of 870,200 from holding Hyundai Motor Co or generate 5.61% 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. Korean Air Lines
Performance |
| Timeline |
| Hyundai Motor |
| Korean Air Lines |
Hyundai and Korean Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Korean Air
The main advantage of trading using opposite Hyundai and Korean Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Korean 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 Korean Air will offset losses from the drop in Korean Air's long position.| Hyundai vs. Busan Industrial Co | Hyundai vs. Busan Ind | Hyundai vs. Mirae Asset Daewoo | Hyundai vs. Shinhan WTI Futures |
| Korean Air vs. Samsung Electronics Co | Korean Air vs. Samsung Electronics Co | Korean Air vs. Hyundai Motor Co | Korean Air vs. Hyundai Motor |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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