Correlation Between Ni Steel and Hyundai

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

By analyzing existing cross correlation between Ni Steel and Hyundai Motor, you can compare the effects of market volatilities on Ni Steel and Hyundai 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 Ni Steel with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ni Steel and Hyundai.

Diversification Opportunities for Ni Steel and Hyundai

0.86

Correlation Coefficient

Ni Steel  Hyundai

Very poor diversification

The 3 months correlation between 008260 and Hyundai is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ni Steel and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Ni Steel 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 Ni Steel are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Ni Steel i.e., Ni Steel and Hyundai go up and down completely randomly.

Pair Corralation between Ni Steel and Hyundai

Assuming the 90 days trading horizon Ni Steel is expected to under-perform the Hyundai. But the stock apears to be less risky and, when comparing its historical volatility, Ni Steel is 1.05 times less risky than Hyundai. The stock trades about -0.19 of its potential returns per unit of risk. The Hyundai Motor is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  21,550,000  in Hyundai Motor on September 20, 2024 and sell it today you would lose (350,000) from holding Hyundai Motor or give up 1.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Ni Steel  vs.  Hyundai Motor

Ni Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ni Steel 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.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor 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.

Pair Trading with Ni Steel and Hyundai

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

The idea behind Ni Steel and Hyundai Motor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.