Correlation Between Electronic Arts and Hyundai
Can any of the company-specific risk be diversified away by investing in both Electronic Arts 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 Electronic Arts and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Hyundai Motor, you can compare the effects of market volatilities on Electronic Arts 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 Electronic Arts with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Hyundai.
Diversification Opportunities for Electronic Arts and Hyundai
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Electronic and Hyundai is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Electronic Arts 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 Electronic Arts 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 Electronic Arts i.e., Electronic Arts and Hyundai go up and down completely randomly.
Pair Corralation between Electronic Arts and Hyundai
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.62 times more return on investment than Hyundai. However, Electronic Arts is 1.61 times less risky than Hyundai. It trades about -0.36 of its potential returns per unit of risk. Hyundai Motor is currently generating about -0.28 per unit of risk. If you would invest 15,470 in Electronic Arts on September 28, 2024 and sell it today you would lose (1,364) from holding Electronic Arts or give up 8.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.0% |
| Values | Daily Returns |
Electronic Arts vs. Hyundai Motor
Performance |
| Timeline |
| Electronic Arts |
| Hyundai Motor |
Electronic Arts and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Hyundai
The main advantage of trading using opposite Electronic Arts and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts 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.The idea behind Electronic Arts and Hyundai Motor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Hyundai vs. BYD Company Limited | Hyundai vs. MERCEDES BENZ GRP ADR14 | Hyundai vs. VOLKSWAGEN ADR 110ON | Hyundai vs. Volkswagen AG |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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