Correlation Between Lake Materials and Hyundai
Can any of the company-specific risk be diversified away by investing in both Lake Materials 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 Lake Materials and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Materials Co and Hyundai Motor Co, you can compare the effects of market volatilities on Lake Materials 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 Lake Materials with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Hyundai.
Diversification Opportunities for Lake Materials and Hyundai
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and Hyundai is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Lake Materials 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 Lake Materials 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 Lake Materials i.e., Lake Materials and Hyundai go up and down completely randomly.
Pair Corralation between Lake Materials and Hyundai
Assuming the 90 days trading horizon Lake Materials is expected to generate 3.26 times less return on investment than Hyundai. In addition to that, Lake Materials is 2.17 times more volatile than Hyundai Motor Co. It trades about 0.01 of its total potential returns per unit of risk. Hyundai Motor Co is currently generating about 0.08 per unit of volatility. If you would invest 9,571,395 in Hyundai Motor Co on August 31, 2024 and sell it today you would earn a total of 6,448,605 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 | 99.72% |
| Values | Daily Returns |
Lake Materials Co vs. Hyundai Motor Co
Performance |
| Timeline |
| Lake Materials |
| Hyundai Motor |
Lake Materials and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Hyundai
The main advantage of trading using opposite Lake Materials and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials 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.| Lake Materials vs. LG Electronics Pfd | Lake Materials vs. Sungmoon Electronics Co | Lake Materials vs. Shinsegae Information Communication | Lake Materials vs. Shinil Electronics Co |
| Hyundai vs. Korea Electronic Certification | Hyundai vs. Lotte Non Life Insurance | Hyundai vs. Cuckoo Electronics Co | Hyundai vs. LG Electronics |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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