Correlation Between Guangzhou Automobile and Hyundai
Can any of the company-specific risk be diversified away by investing in both Guangzhou Automobile 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 Guangzhou Automobile and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangzhou Automobile Group and Hyundai Motor Co, you can compare the effects of market volatilities on Guangzhou Automobile 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 Guangzhou Automobile with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Automobile and Hyundai.
Diversification Opportunities for Guangzhou Automobile and Hyundai
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Guangzhou and Hyundai is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Guangzhou Automobile 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 Guangzhou Automobile 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 Guangzhou Automobile i.e., Guangzhou Automobile and Hyundai go up and down completely randomly.
Pair Corralation between Guangzhou Automobile and Hyundai
Assuming the 90 days horizon Guangzhou Automobile is expected to generate 1.55 times less return on investment than Hyundai. In addition to that, Guangzhou Automobile is 2.56 times more volatile than Hyundai Motor Co. It trades about 0.02 of its total potential returns per unit of risk. Hyundai Motor Co is currently generating about 0.07 per unit of volatility. If you would invest 3,789 in Hyundai Motor Co on September 2, 2024 and sell it today you would earn a total of 1,792 from holding Hyundai Motor Co or generate 47.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 82.26% |
| Values | Daily Returns |
Guangzhou Automobile Group vs. Hyundai Motor Co
Performance |
| Timeline |
| Guangzhou Automobile |
| Hyundai Motor |
Guangzhou Automobile and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangzhou Automobile and Hyundai
The main advantage of trading using opposite Guangzhou Automobile and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Automobile 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.| Guangzhou Automobile vs. Volkswagen AG 110 | Guangzhou Automobile vs. Stellantis NV | Guangzhou Automobile vs. Toyota Motor | Guangzhou Automobile vs. Honda Motor Co |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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