Correlation Between Hyundai and Kmw

Can any of the company-specific risk be diversified away by investing in both Hyundai and Kmw 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 Kmw 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 Kmw Inc, you can compare the effects of market volatilities on Hyundai and Kmw 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 Kmw. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Kmw.

Diversification Opportunities for Hyundai and Kmw

0.46

Correlation Coefficient

Hyundai  Kmw

Very weak diversification

The 3 months correlation between Hyundai and Kmw is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Kmw Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmw Inc 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 Kmw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kmw Inc has no effect on the direction of Hyundai i.e., Hyundai and Kmw go up and down completely randomly.

Pair Corralation between Hyundai and Kmw

Assuming the 90 days trading horizon Hyundai Motor Co is expected to generate 0.48 times more return on investment than Kmw. However, Hyundai Motor Co is 2.09 times less risky than Kmw. It trades about 0.08 of its potential returns per unit of risk. Kmw Inc is currently generating about -0.04 per unit of risk. If you would invest  7,798,426  in Hyundai Motor Co on December 11, 2024 and sell it today you would earn a total of  6,851,574  from holding Hyundai Motor Co or generate 87.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Hyundai Motor Co  vs.  Kmw Inc

Hyundai Motor

Risk-Adjusted Performance

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 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.

Kmw Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Kmw Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kmw 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 Kmw

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

The idea behind Hyundai Motor Co and Kmw Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .