Correlation Between Hyundai and VAIV

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

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

Diversification Opportunities for Hyundai and VAIV

-0.67

Correlation Coefficient

Hyundai  VAIV

Excellent diversification

The 3 months correlation between Hyundai and VAIV is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and VAIV Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VAIV 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 VAIV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VAIV has no effect on the direction of Hyundai i.e., Hyundai and VAIV go up and down completely randomly.

Pair Corralation between Hyundai and VAIV

Assuming the 90 days trading horizon Hyundai is expected to generate 12.08 times less return on investment than VAIV. But when comparing it to its historical volatility, Hyundai Motor is 3.14 times less risky than VAIV. It trades about 0.02 of its potential returns per unit of risk. VAIV Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  386,500  in VAIV Co on December 25, 2024 and sell it today you would earn a total of  55,500  from holding VAIV Co or generate 14.36% 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.  VAIV Co

Hyundai Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

VAIV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VAIV Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, VAIV sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and VAIV

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

The idea behind Hyundai Motor and VAIV 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.