Correlation Between Hyundai and HMM
Can any of the company-specific risk be diversified away by investing in both Hyundai and HMM 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 HMM 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 HMM Co, you can compare the effects of market volatilities on Hyundai and HMM 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 HMM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and HMM.
Diversification Opportunities for Hyundai and HMM
Good diversification
The 3 months correlation between Hyundai and HMM is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co 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 HMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of Hyundai i.e., Hyundai and HMM go up and down completely randomly.
Pair Corralation between Hyundai and HMM
Assuming the 90 days trading horizon Hyundai Motor Co is expected to under-perform the HMM. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor Co is 1.1 times less risky than HMM. The stock trades about -0.05 of its potential returns per unit of risk. The HMM Co is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,575,000 in HMM Co on September 12, 2024 and sell it today you would earn a total of 261,000 from holding HMM Co or generate 16.57% 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. HMM Co
Performance |
| Timeline |
| Hyundai Motor |
| HMM Co |
Hyundai and HMM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and HMM
The main advantage of trading using opposite Hyundai and HMM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, HMM 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 HMM will offset losses from the drop in HMM's long position.| Hyundai vs. Hyundai Motor Co | Hyundai vs. Solution Advanced Technology | Hyundai vs. Busan Industrial Co | Hyundai vs. Busan Ind |
| HMM vs. Korea New Network | HMM vs. Solution Advanced Technology | HMM vs. Busan Industrial Co | HMM 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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