Correlation Between Seoul Food and Hyundai

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

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

Diversification Opportunities for Seoul Food and Hyundai

0.55

Correlation Coefficient

Seoul Food  Hyundai

Very weak diversification

The 3 months correlation between Seoul and Hyundai is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Food Industrial and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Seoul Food 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 Seoul Food Industrial 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 Seoul Food i.e., Seoul Food and Hyundai go up and down completely randomly.

Pair Corralation between Seoul Food and Hyundai

Assuming the 90 days trading horizon Seoul Food is expected to generate 20.7 times less return on investment than Hyundai. But when comparing it to its historical volatility, Seoul Food Industrial is 1.44 times less risky than Hyundai. It trades about 0.0 of its potential returns per unit of risk. Hyundai Motor Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  15,270,000  in Hyundai Motor Co on October 22, 2024 and sell it today you would earn a total of  170,000  from holding Hyundai Motor Co or generate 1.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Seoul Food Industrial  vs.  Hyundai Motor Co

Seoul Food Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoul Food Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoul Food is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor Co 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 Seoul Food and Hyundai

The main advantage of trading using opposite Seoul Food and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Food 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 Seoul Food Industrial and Hyundai Motor Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.