Correlation Between Hyundai and Dong A

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

Diversification Opportunities for Hyundai and Dong A

0.08

Correlation Coefficient

Hyundai  Dong A

Significant diversification

The 3 months correlation between Hyundai and Dong is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek 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 Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Hyundai i.e., Hyundai and Dong A go up and down completely randomly.

Pair Corralation between Hyundai and Dong A

Assuming the 90 days trading horizon Hyundai Motor Co is expected to generate 0.81 times more return on investment than Dong A. However, Hyundai Motor Co is 1.23 times less risky than Dong A. It trades about 0.04 of its potential returns per unit of risk. Dong A Eltek is currently generating about -0.2 per unit of risk. If you would invest  14,951,300  in Hyundai Motor Co on December 25, 2024 and sell it today you would earn a total of  378,700  from holding Hyundai Motor Co or generate 2.53% return on investment over 90 days.

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

Hyundai Motor Co  vs.  Dong A Eltek

Hyundai Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Motor Co are ranked lower than 3 (%) 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.

Dong A Eltek

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dong A Eltek 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hyundai and Dong A

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

The idea behind Hyundai Motor Co and Dong A Eltek 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.