Correlation Between Retail Estates and Hyundai
Can any of the company-specific risk be diversified away by investing in both Retail Estates and Hyundai 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 Retail Estates and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Estates NV and Hyundai Motor, you can compare the effects of market volatilities on Retail Estates and Hyundai 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 Retail Estates with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and Hyundai.
Diversification Opportunities for Retail Estates and Hyundai
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Retail and Hyundai is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Retail Estates 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 Retail Estates NV are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Retail Estates i.e., Retail Estates and Hyundai go up and down completely randomly.
Pair Corralation between Retail Estates and Hyundai
Assuming the 90 days horizon Retail Estates NV is expected to under-perform the Hyundai. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 2.4 times less risky than Hyundai. The stock trades about -0.2 of its potential returns per unit of risk. The Hyundai Motor is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 5,160 in Hyundai Motor on September 12, 2024 and sell it today you would lose (140.00) from holding Hyundai Motor or give up 2.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retail Estates NV vs. Hyundai Motor
Performance |
| Timeline |
| Retail Estates NV |
| Hyundai Motor |
Retail Estates and Hyundai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retail Estates and Hyundai
The main advantage of trading using opposite Retail Estates and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates position performs unexpectedly, Hyundai 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 Hyundai will offset losses from the drop in Hyundai's long position.| Retail Estates vs. Vicinity Centres | Retail Estates vs. Superior Plus Corp | Retail Estates vs. NMI Holdings | Retail Estates 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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