Correlation Between Hyundai and Guangzhou Automobile
Can any of the company-specific risk be diversified away by investing in both Hyundai and Guangzhou Automobile 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 Guangzhou Automobile 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 Guangzhou Automobile Group, you can compare the effects of market volatilities on Hyundai and Guangzhou Automobile 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 Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Guangzhou Automobile.
Diversification Opportunities for Hyundai and Guangzhou Automobile
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hyundai and Guangzhou is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile 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 Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Hyundai i.e., Hyundai and Guangzhou Automobile go up and down completely randomly.
Pair Corralation between Hyundai and Guangzhou Automobile
Assuming the 90 days horizon Hyundai Motor Co is expected to generate 0.4 times more return on investment than Guangzhou Automobile. However, Hyundai Motor Co is 2.49 times less risky than Guangzhou Automobile. It trades about 0.06 of its potential returns per unit of risk. Guangzhou Automobile Group is currently generating about 0.01 per unit of risk. If you would invest 3,726 in Hyundai Motor Co on August 31, 2024 and sell it today you would earn a total of 1,974 from holding Hyundai Motor Co or generate 52.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 80.16% |
| Values | Daily Returns |
Hyundai Motor Co vs. Guangzhou Automobile Group
Performance |
| Timeline |
| Hyundai Motor |
| Guangzhou Automobile |
Hyundai and Guangzhou Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Guangzhou Automobile
The main advantage of trading using opposite Hyundai and Guangzhou Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Guangzhou Automobile 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 Guangzhou Automobile will offset losses from the drop in Guangzhou Automobile's long position.The idea behind Hyundai Motor Co and Guangzhou Automobile Group 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.| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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