Correlation Between Hyundai and ARB
Can any of the company-specific risk be diversified away by investing in both Hyundai and ARB 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 Hyundai and ARB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor Co and ARB Limited, you can compare the effects of market volatilities on Hyundai and ARB 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 Hyundai with a short position of ARB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and ARB.
Diversification Opportunities for Hyundai and ARB
Very poor diversification
The 3 months correlation between Hyundai and ARB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and ARB Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARB Limited and Hyundai 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 Hyundai Motor Co are associated (or correlated) with ARB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARB Limited has no effect on the direction of Hyundai i.e., Hyundai and ARB go up and down completely randomly.
Pair Corralation between Hyundai and ARB
Assuming the 90 days horizon Hyundai Motor Co is expected to generate 1.94 times more return on investment than ARB. However, Hyundai is 1.94 times more volatile than ARB Limited. It trades about 0.07 of its potential returns per unit of risk. ARB Limited is currently generating about 0.07 per unit of risk. If you would invest 2,817 in Hyundai Motor Co on September 2, 2024 and sell it today you would earn a total of 2,764 from holding Hyundai Motor Co or generate 98.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 72.38% |
| Values | Daily Returns |
Hyundai Motor Co vs. ARB Limited
Performance |
| Timeline |
| Hyundai Motor |
| ARB Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Hyundai and ARB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and ARB
The main advantage of trading using opposite Hyundai and ARB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, ARB 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 ARB will offset losses from the drop in ARB's long position.The idea behind Hyundai Motor Co and ARB Limited 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.| ARB vs. Bank of America | ARB vs. Skillful Craftsman Education | ARB vs. Old Dominion Freight | ARB vs. PennantPark Investment |
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 CEOs Directory module to screen CEOs from public companies around the world.
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