Correlation Between Hyundai and Nongshim
Can any of the company-specific risk be diversified away by investing in both Hyundai and Nongshim 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 Nongshim 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 Nongshim, you can compare the effects of market volatilities on Hyundai and Nongshim 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 Nongshim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Nongshim.
Diversification Opportunities for Hyundai and Nongshim
Poor diversification
The 3 months correlation between Hyundai and Nongshim is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Nongshim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nongshim 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 Nongshim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nongshim has no effect on the direction of Hyundai i.e., Hyundai and Nongshim go up and down completely randomly.
Pair Corralation between Hyundai and Nongshim
Assuming the 90 days trading horizon Hyundai Motor Co is expected to generate 0.93 times more return on investment than Nongshim. However, Hyundai Motor Co is 1.08 times less risky than Nongshim. It trades about 0.08 of its potential returns per unit of risk. Nongshim is currently generating about -0.02 per unit of risk. If you would invest 9,535,913 in Hyundai Motor Co on September 4, 2024 and sell it today you would earn a total of 6,424,087 from holding Hyundai Motor Co or generate 67.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor Co vs. Nongshim
Performance |
| Timeline |
| Hyundai Motor |
| Nongshim |
Hyundai and Nongshim Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Nongshim
The main advantage of trading using opposite Hyundai and Nongshim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Nongshim 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 Nongshim will offset losses from the drop in Nongshim's long position.| Hyundai vs. Chin Yang Chemical | Hyundai vs. Chorokbaem Healthcare Co | Hyundai vs. Sung Bo Chemicals | Hyundai vs. LG Chemicals |
| Nongshim vs. Kakao Games Corp | Nongshim vs. LG Household Healthcare | Nongshim vs. Cloud Air CoLtd | Nongshim vs. Bohae Brewery |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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