Correlation Between Auto Trader and Hyundai
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Hyundai Motor, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Hyundai.
Diversification Opportunities for Auto Trader and Hyundai
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Auto and Hyundai is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Hyundai go up and down completely randomly.
Pair Corralation between Auto Trader and Hyundai
Assuming the 90 days trading horizon Auto Trader is expected to generate 1.59 times less return on investment than Hyundai. But when comparing it to its historical volatility, Auto Trader Group is 1.57 times less risky than Hyundai. It trades about 0.07 of its potential returns per unit of risk. Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,621 in Hyundai Motor on September 20, 2024 and sell it today you would earn a total of 2,659 from holding Hyundai Motor or generate 101.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Hyundai Motor
Performance |
| Timeline |
| Auto Trader Group |
| Hyundai Motor |
Auto Trader and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Hyundai
The main advantage of trading using opposite Auto Trader and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.| Auto Trader vs. Berkshire Hathaway | Auto Trader vs. Hyundai Motor | Auto Trader vs. Samsung Electronics Co | Auto Trader vs. Samsung Electronics Co |
| Hyundai vs. Gear4music Plc | Hyundai vs. Thor Mining PLC | Hyundai vs. Auto Trader Group | Hyundai vs. Universal Music Group |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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