Correlation Between Hyundai and Industrial Bank

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

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

Diversification Opportunities for Hyundai and Industrial Bank

-0.52

Correlation Coefficient

Hyundai  Industrial Bank

Excellent diversification

The 3 months correlation between Hyundai and Industrial is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Industrial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Bank 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 Co are associated (or correlated) with Industrial Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Bank has no effect on the direction of Hyundai i.e., Hyundai and Industrial Bank go up and down completely randomly.

Pair Corralation between Hyundai and Industrial Bank

Assuming the 90 days trading horizon Hyundai Motor Co is expected to under-perform the Industrial Bank. In addition to that, Hyundai is 1.11 times more volatile than Industrial Bank. It trades about -0.1 of its total potential returns per unit of risk. Industrial Bank is currently generating about -0.06 per unit of volatility. If you would invest  1,465,000  in Industrial Bank on September 24, 2024 and sell it today you would lose (36,000) from holding Industrial Bank or give up 2.46% of portfolio value over 90 days.

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

Hyundai Motor Co  vs.  Industrial Bank

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

Industrial Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Industrial Bank 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 Industrial Bank

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

The idea behind Hyundai Motor Co and Industrial Bank 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.