Correlation Between Hyundai and Daishin Balance

Can any of the company-specific risk be diversified away by investing in both Hyundai and Daishin Balance 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 Daishin Balance 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 Daishin Balance 1, you can compare the effects of market volatilities on Hyundai and Daishin Balance 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 Daishin Balance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Daishin Balance.

Diversification Opportunities for Hyundai and Daishin Balance

0.44

Correlation Coefficient

Hyundai  Daishin Balance

Very weak diversification

The 3 months correlation between Hyundai and Daishin is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Daishin Balance 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daishin Balance 1 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 Daishin Balance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daishin Balance 1 has no effect on the direction of Hyundai i.e., Hyundai and Daishin Balance go up and down completely randomly.

Pair Corralation between Hyundai and Daishin Balance

Assuming the 90 days trading horizon Hyundai is expected to generate 13.41 times less return on investment than Daishin Balance. But when comparing it to its historical volatility, Hyundai Motor Co is 2.15 times less risky than Daishin Balance. It trades about 0.03 of its potential returns per unit of risk. Daishin Balance 1 is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  538,000  in Daishin Balance 1 on November 29, 2024 and sell it today you would earn a total of  172,000  from holding Daishin Balance 1 or generate 31.97% 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.  Daishin Balance 1

Hyundai Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Motor Co are ranked lower than 2 (%) 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.

Daishin Balance 1

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daishin Balance 1 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daishin Balance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and Daishin Balance

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

The idea behind Hyundai Motor Co and Daishin Balance 1 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.