Correlation Between Hyundai and SEOJEON ELECTRIC

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

Diversification Opportunities for Hyundai and SEOJEON ELECTRIC

0.59

Correlation Coefficient

Hyundai  SEOJEON ELECTRIC

Very weak diversification

The 3 months correlation between Hyundai and SEOJEON is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and SEOJEON ELECTRIC MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEOJEON ELECTRIC MAC 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 SEOJEON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEOJEON ELECTRIC MAC has no effect on the direction of Hyundai i.e., Hyundai and SEOJEON ELECTRIC go up and down completely randomly.

Pair Corralation between Hyundai and SEOJEON ELECTRIC

Assuming the 90 days trading horizon Hyundai is expected to generate 45.66 times less return on investment than SEOJEON ELECTRIC. But when comparing it to its historical volatility, Hyundai Motor Co is 2.87 times less risky than SEOJEON ELECTRIC. It trades about 0.0 of its potential returns per unit of risk. SEOJEON ELECTRIC MACHINERY is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  430,000  in SEOJEON ELECTRIC MACHINERY on December 2, 2024 and sell it today you would earn a total of  31,500  from holding SEOJEON ELECTRIC MACHINERY or generate 7.33% return on investment over 90 days.

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

Hyundai Motor Co  vs.  SEOJEON ELECTRIC MACHINERY

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.

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SEOJEON ELECTRIC MACHINERY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SEOJEON ELECTRIC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and SEOJEON ELECTRIC

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

The idea behind Hyundai Motor Co and SEOJEON ELECTRIC MACHINERY 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.