Correlation Between Hyundai and BH

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

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

Diversification Opportunities for Hyundai and BH

0.18

Correlation Coefficient

Hyundai  BH

Average diversification

The 3 months correlation between Hyundai and BH is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and BH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Co 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 BH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Co has no effect on the direction of Hyundai i.e., Hyundai and BH go up and down completely randomly.

Pair Corralation between Hyundai and BH

Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.68 times more return on investment than BH. However, Hyundai Motor is 1.46 times less risky than BH. It trades about 0.03 of its potential returns per unit of risk. BH Co is currently generating about -0.01 per unit of risk. If you would invest  15,714,800  in Hyundai Motor on December 4, 2024 and sell it today you would earn a total of  3,585,200  from holding Hyundai Motor or generate 22.81% return on investment over 90 days.

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

Hyundai Motor  vs.  BH 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 somewhat strong basic indicators, Hyundai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BH Co

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hyundai and BH

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

The idea behind Hyundai Motor and BH 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.