Correlation Between Top Material and Hyundai
Can any of the company-specific risk be diversified away by investing in both Top Material 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 Top Material and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Top Material Co and Hyundai Motor Co, you can compare the effects of market volatilities on Top Material 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 Top Material with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Material and Hyundai.
Diversification Opportunities for Top Material and Hyundai
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Top and Hyundai is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Top Material 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 Top Material 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 Top Material 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 Top Material i.e., Top Material and Hyundai go up and down completely randomly.
Pair Corralation between Top Material and Hyundai
Assuming the 90 days trading horizon Top Material Co is expected to under-perform the Hyundai. In addition to that, Top Material is 1.73 times more volatile than Hyundai Motor Co. It trades about -0.48 of its total potential returns per unit of risk. Hyundai Motor Co is currently generating about -0.01 per unit of volatility. If you would invest 15,770,000 in Hyundai Motor Co on September 3, 2024 and sell it today you would lose (70,000) from holding Hyundai Motor Co or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Top Material Co vs. Hyundai Motor Co
Performance |
| Timeline |
| Top Material |
| Hyundai Motor |
Top Material and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Top Material and Hyundai
The main advantage of trading using opposite Top Material and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Material 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.| Top Material vs. Samsung Electronics Co | Top Material vs. Samsung Electronics Co | Top Material vs. LG Energy Solution | Top Material vs. SK Hynix |
| Hyundai vs. NewFlex Technology Co | Hyundai vs. KG Eco Technology | Hyundai vs. Solution Advanced Technology | Hyundai vs. iNtRON Biotechnology |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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