Correlation Between Hyundai and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both Hyundai and NSTAR Electric 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 NSTAR Electric 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 NSTAR Electric, you can compare the effects of market volatilities on Hyundai and NSTAR Electric 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 NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and NSTAR Electric.
Diversification Opportunities for Hyundai and NSTAR Electric
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hyundai and NSTAR is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric 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 NSTAR Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of Hyundai i.e., Hyundai and NSTAR Electric go up and down completely randomly.
Pair Corralation between Hyundai and NSTAR Electric
Assuming the 90 days horizon Hyundai Motor Co is expected to generate 1.23 times more return on investment than NSTAR Electric. However, Hyundai is 1.23 times more volatile than NSTAR Electric. It trades about 0.06 of its potential returns per unit of risk. NSTAR Electric is currently generating about 0.0 per unit of risk. If you would invest 3,636 in Hyundai Motor Co on September 12, 2024 and sell it today you would earn a total of 1,773 from holding Hyundai Motor Co or generate 48.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 62.73% |
| Values | Daily Returns |
Hyundai Motor Co vs. NSTAR Electric
Performance |
| Timeline |
| Hyundai Motor |
| NSTAR Electric |
Hyundai and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and NSTAR Electric
The main advantage of trading using opposite Hyundai and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, NSTAR Electric 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 NSTAR Electric will offset losses from the drop in NSTAR Electric's long position.The idea behind Hyundai Motor Co and NSTAR Electric 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.| NSTAR Electric vs. NRG Energy | NSTAR Electric vs. United Utilities Group | NSTAR Electric vs. Celestica | NSTAR Electric vs. United Microelectronics |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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