Correlation Between Kia Corp and Hyundai

Can any of the company-specific risk be diversified away by investing in both Kia Corp 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 Kia Corp and Hyundai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kia Corp and Hyundai Motor, you can compare the effects of market volatilities on Kia Corp 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 Kia Corp with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kia Corp and Hyundai.

Diversification Opportunities for Kia Corp and Hyundai

0.79

Correlation Coefficient

Kia Corp  Hyundai

Poor diversification

The 3 months correlation between Kia and Hyundai is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kia Corp and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Kia Corp 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 Kia Corp 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 Kia Corp i.e., Kia Corp and Hyundai go up and down completely randomly.

Pair Corralation between Kia Corp and Hyundai

Assuming the 90 days trading horizon Kia Corp is expected to under-perform the Hyundai. But the stock apears to be less risky and, when comparing its historical volatility, Kia Corp is 1.08 times less risky than Hyundai. The stock trades about -0.08 of its potential returns per unit of risk. The Hyundai Motor is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  24,410,000  in Hyundai Motor on August 31, 2024 and sell it today you would lose (2,510,000) from holding Hyundai Motor or give up 10.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Kia Corp  vs.  Hyundai Motor

Kia Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kia Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kia Corp and Hyundai

The main advantage of trading using opposite Kia Corp and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kia Corp 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.

The idea behind Kia Corp and Hyundai Motor 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.