Correlation Between Hyundai and Orient Telecoms
Can any of the company-specific risk be diversified away by investing in both Hyundai and Orient Telecoms 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 Orient Telecoms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyundai Motor and Orient Telecoms, you can compare the effects of market volatilities on Hyundai and Orient Telecoms 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 Orient Telecoms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Orient Telecoms.
Diversification Opportunities for Hyundai and Orient Telecoms
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hyundai and Orient is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Orient Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Telecoms 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 Orient Telecoms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Telecoms has no effect on the direction of Hyundai i.e., Hyundai and Orient Telecoms go up and down completely randomly.
Pair Corralation between Hyundai and Orient Telecoms
Assuming the 90 days trading horizon Hyundai Motor is expected to generate 1.65 times more return on investment than Orient Telecoms. However, Hyundai is 1.65 times more volatile than Orient Telecoms. It trades about 0.07 of its potential returns per unit of risk. Orient Telecoms is currently generating about -0.06 per unit of risk. If you would invest 3,976 in Hyundai Motor on August 28, 2024 and sell it today you would earn a total of 1,484 from holding Hyundai Motor or generate 37.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Hyundai Motor vs. Orient Telecoms
Performance |
| Timeline |
| Hyundai Motor |
| Orient Telecoms |
Hyundai and Orient Telecoms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hyundai and Orient Telecoms
The main advantage of trading using opposite Hyundai and Orient Telecoms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Orient Telecoms 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 Orient Telecoms will offset losses from the drop in Orient Telecoms' long position.| Hyundai vs. MG Plc | Hyundai vs. Admiral Group PLC | Hyundai vs. Anglo American PLC | Hyundai vs. Vodafone Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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