Correlation Between HMM and Hyundai
Can any of the company-specific risk be diversified away by investing in both HMM and Hyundai 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 HMM and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMM Co and Hyundai Motor, you can compare the effects of market volatilities on HMM and Hyundai 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 HMM with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMM and Hyundai.
Diversification Opportunities for HMM and Hyundai
Good diversification
The 3 months correlation between HMM and Hyundai is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding HMM Co and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and HMM 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 HMM Co are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of HMM i.e., HMM and Hyundai go up and down completely randomly.
Pair Corralation between HMM and Hyundai
Assuming the 90 days trading horizon HMM Co is expected to generate 1.07 times more return on investment than Hyundai. However, HMM is 1.07 times more volatile than Hyundai Motor. It trades about 0.1 of its potential returns per unit of risk. Hyundai Motor is currently generating about -0.06 per unit of risk. If you would invest 1,655,000 in HMM Co on September 12, 2024 and sell it today you would earn a total of 222,000 from holding HMM Co or generate 13.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HMM Co vs. Hyundai Motor
Performance |
| Timeline |
| HMM Co |
| Hyundai Motor |
HMM and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMM and Hyundai
The main advantage of trading using opposite HMM and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMM position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai's long position.| HMM vs. Korea New Network | HMM vs. Solution Advanced Technology | HMM vs. Busan Industrial Co | HMM vs. Busan Ind |
| Hyundai vs. Daou Data Corp | Hyundai vs. Solution Advanced Technology | Hyundai vs. Busan Industrial Co | Hyundai 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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