Correlation Between Hyundai and PERRIGO
Can any of the company-specific risk be diversified away by investing in both Hyundai and PERRIGO 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 PERRIGO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and PERRIGO, you can compare the effects of market volatilities on Hyundai and PERRIGO 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 PERRIGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and PERRIGO.
Diversification Opportunities for Hyundai and PERRIGO
Poor diversification
The 3 months correlation between Hyundai and PERRIGO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and PERRIGO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PERRIGO 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 are associated (or correlated) with PERRIGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PERRIGO has no effect on the direction of Hyundai i.e., Hyundai and PERRIGO go up and down completely randomly.
Pair Corralation between Hyundai and PERRIGO
Assuming the 90 days horizon Hyundai Motor is expected to under-perform the PERRIGO. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 5.01 times less risky than PERRIGO. The stock trades about -0.01 of its potential returns per unit of risk. The PERRIGO is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 89.00 in PERRIGO on September 15, 2024 and sell it today you would lose (17.00) from holding PERRIGO or give up 19.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. PERRIGO
Performance |
| Timeline |
| Hyundai Motor |
| PERRIGO |
Hyundai and PERRIGO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and PERRIGO
The main advantage of trading using opposite Hyundai and PERRIGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, PERRIGO 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 PERRIGO will offset losses from the drop in PERRIGO's long position.| Hyundai vs. BYD Company Limited | Hyundai vs. MERCEDES BENZ GRP ADR14 | Hyundai vs. Superior Plus Corp | Hyundai vs. SIVERS SEMICONDUCTORS AB |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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