Correlation Between Hyundai and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Hyundai and Fast Retailing 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 Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Fast Retailing Co, you can compare the effects of market volatilities on Hyundai and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Fast Retailing.
Diversification Opportunities for Hyundai and Fast Retailing
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hyundai and Fast is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Hyundai i.e., Hyundai and Fast Retailing go up and down completely randomly.
Pair Corralation between Hyundai and Fast Retailing
Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the Fast Retailing. In addition to that, Hyundai is 1.22 times more volatile than Fast Retailing Co. It trades about -0.05 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.3 per unit of volatility. If you would invest 29,920 in Fast Retailing Co on September 12, 2024 and sell it today you would earn a total of 3,510 from holding Fast Retailing Co or generate 11.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Fast Retailing Co
Performance |
| Timeline |
| Hyundai Motor |
| Fast Retailing |
Hyundai and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Fast Retailing
The main advantage of trading using opposite Hyundai and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.The idea behind Hyundai Motor and Fast Retailing Co 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.| Fast Retailing vs. Mitsubishi Materials | Fast Retailing vs. Martin Marietta Materials | Fast Retailing vs. Infrastrutture Wireless Italiane | Fast Retailing vs. The Yokohama Rubber |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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