Correlation Between Hyundai and American Electric
Can any of the company-specific risk be diversified away by investing in both Hyundai and American 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 American Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and American Electric Power, you can compare the effects of market volatilities on Hyundai and American 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 American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and American Electric.
Diversification Opportunities for Hyundai and American Electric
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hyundai and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and American Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Electric Power 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 American Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Electric Power has no effect on the direction of Hyundai i.e., Hyundai and American Electric go up and down completely randomly.
Pair Corralation between Hyundai and American Electric
Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the American Electric. In addition to that, Hyundai is 1.94 times more volatile than American Electric Power. It trades about -0.16 of its total potential returns per unit of risk. American Electric Power is currently generating about -0.07 per unit of volatility. If you would invest 9,762 in American Electric Power on September 13, 2024 and sell it today you would lose (413.00) from holding American Electric Power or give up 4.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Hyundai Motor vs. American Electric Power
Performance |
| Timeline |
| Hyundai Motor |
| American Electric Power |
Hyundai and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and American Electric
The main advantage of trading using opposite Hyundai and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, American 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 American Electric will offset losses from the drop in American Electric's long position.| Hyundai vs. Panther Metals PLC | Hyundai vs. METALL ZUG AG | Hyundai vs. Power Metal Resources | Hyundai vs. American Homes 4 |
| American Electric vs. Samsung Electronics Co | American Electric vs. Samsung Electronics Co | American Electric vs. Hyundai Motor | American Electric vs. Reliance Industries Ltd |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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