Correlation Between System and Hyundai
Can any of the company-specific risk be diversified away by investing in both System 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 System and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between System and Application and Hyundai Motor Co, you can compare the effects of market volatilities on System 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 System with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and Hyundai.
Diversification Opportunities for System and Hyundai
Poor diversification
The 3 months correlation between System and Hyundai is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and System 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 System and Application 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 System i.e., System and Hyundai go up and down completely randomly.
Pair Corralation between System and Hyundai
Assuming the 90 days trading horizon System and Application is expected to under-perform the Hyundai. In addition to that, System is 1.51 times more volatile than Hyundai Motor Co. It trades about -0.05 of its total potential returns per unit of risk. Hyundai Motor Co is currently generating about 0.1 per unit of volatility. If you would invest 9,382,743 in Hyundai Motor Co on September 1, 2024 and sell it today you would earn a total of 6,317,257 from holding Hyundai Motor Co or generate 67.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
System and Application vs. Hyundai Motor Co
Performance |
| Timeline |
| System and Application |
| Hyundai Motor |
System and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with System and Hyundai
The main advantage of trading using opposite System and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System 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.| System vs. Dongsin Engineering Construction | System vs. Doosan Fuel Cell | System vs. Daishin Balance 1 | System vs. Total Soft Bank |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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