Correlation Between Hyundai and Okins Electronics

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

By analyzing existing cross correlation between Hyundai Motor and Okins Electronics Co, you can compare the effects of market volatilities on Hyundai and Okins Electronics 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 Okins Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Okins Electronics.

Diversification Opportunities for Hyundai and Okins Electronics

-0.42

Correlation Coefficient

Hyundai  Okins Electronics

Very good diversification

The 3 months correlation between Hyundai and Okins is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Okins Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Okins Electronics 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 Okins Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Okins Electronics has no effect on the direction of Hyundai i.e., Hyundai and Okins Electronics go up and down completely randomly.

Pair Corralation between Hyundai and Okins Electronics

Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the Okins Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 2.99 times less risky than Okins Electronics. The stock trades about -0.06 of its potential returns per unit of risk. The Okins Electronics Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  443,000  in Okins Electronics Co on December 2, 2024 and sell it today you would earn a total of  121,000  from holding Okins Electronics Co or generate 27.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hyundai Motor  vs.  Okins Electronics Co

Hyundai Motor

Risk-Adjusted Performance

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.

Okins Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Okins Electronics Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Okins Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and Okins Electronics

The main advantage of trading using opposite Hyundai and Okins Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Okins Electronics 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 Okins Electronics will offset losses from the drop in Okins Electronics' long position.

The idea behind Hyundai Motor and Okins Electronics 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.