Correlation Between Hyundai and Tomra Systems
Can any of the company-specific risk be diversified away by investing in both Hyundai and Tomra Systems 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 Tomra Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Tomra Systems ASA, you can compare the effects of market volatilities on Hyundai and Tomra Systems 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 Tomra Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Tomra Systems.
Diversification Opportunities for Hyundai and Tomra Systems
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hyundai and Tomra is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Tomra Systems ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tomra Systems ASA 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 Tomra Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tomra Systems ASA has no effect on the direction of Hyundai i.e., Hyundai and Tomra Systems go up and down completely randomly.
Pair Corralation between Hyundai and Tomra Systems
Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the Tomra Systems. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 1.27 times less risky than Tomra Systems. The stock trades about -0.03 of its potential returns per unit of risk. The Tomra Systems ASA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 15,110 in Tomra Systems ASA on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Tomra Systems ASA or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hyundai Motor vs. Tomra Systems ASA
Performance |
| Timeline |
| Hyundai Motor |
| Tomra Systems ASA |
Hyundai and Tomra Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Tomra Systems
The main advantage of trading using opposite Hyundai and Tomra Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Tomra Systems 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 Tomra Systems will offset losses from the drop in Tomra Systems' long position.| Hyundai vs. Fonix Mobile plc | Hyundai vs. Worldwide Healthcare Trust | Hyundai vs. Omega Healthcare Investors | Hyundai vs. PureTech Health plc |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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