Correlation Between Automobile and Hyundai

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

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

Diversification Opportunities for Automobile and Hyundai

-0.58

Correlation Coefficient

Automobile  Hyundai

Excellent diversification

The 3 months correlation between Automobile and Hyundai is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Hyundai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Automobile 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 Automobile Pc 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 Automobile i.e., Automobile and Hyundai go up and down completely randomly.

Pair Corralation between Automobile and Hyundai

Assuming the 90 days trading horizon Automobile Pc is expected to under-perform the Hyundai. In addition to that, Automobile is 1.45 times more volatile than Hyundai Motor Co. It trades about -0.21 of its total potential returns per unit of risk. Hyundai Motor Co is currently generating about 0.02 per unit of volatility. If you would invest  14,835,800  in Hyundai Motor Co on December 2, 2024 and sell it today you would earn a total of  114,200  from holding Hyundai Motor Co or generate 0.77% return on investment over 90 days.

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

Automobile Pc  vs.  Hyundai Motor Co

Automobile Pc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automobile Pc 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.

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.

Pair Trading with Automobile and Hyundai

The main advantage of trading using opposite Automobile and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile 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 Automobile Pc and Hyundai Motor Co 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.