Correlation Between Hyundai and YG Entertainment

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

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

Diversification Opportunities for Hyundai and YG Entertainment

-0.69

Correlation Coefficient

Hyundai  YG Entertainment

Excellent diversification

The 3 months correlation between Hyundai and 122870 is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and YG Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YG Entertainment 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 YG Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YG Entertainment has no effect on the direction of Hyundai i.e., Hyundai and YG Entertainment go up and down completely randomly.

Pair Corralation between Hyundai and YG Entertainment

Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.78 times more return on investment than YG Entertainment. However, Hyundai Motor is 1.28 times less risky than YG Entertainment. It trades about 0.04 of its potential returns per unit of risk. YG Entertainment is currently generating about -0.13 per unit of risk. If you would invest  20,900,000  in Hyundai Motor on October 5, 2024 and sell it today you would earn a total of  250,000  from holding Hyundai Motor or generate 1.2% return on investment over 90 days.

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

Hyundai Motor  vs.  YG Entertainment

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

YG Entertainment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YG Entertainment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YG Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and YG Entertainment

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

The idea behind Hyundai Motor and YG Entertainment 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.