Correlation Between SK Holdings and Hyundai

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

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

Diversification Opportunities for SK Holdings and Hyundai

-0.17

Correlation Coefficient

SK Holdings  Hyundai

Good diversification

The 3 months correlation between 034730 and Hyundai is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding SK Holdings Co and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and SK Holdings 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 SK Holdings Co 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 SK Holdings i.e., SK Holdings and Hyundai go up and down completely randomly.

Pair Corralation between SK Holdings and Hyundai

Assuming the 90 days trading horizon SK Holdings Co is expected to under-perform the Hyundai. In addition to that, SK Holdings is 1.05 times more volatile than Hyundai Motor. It trades about -0.03 of its total potential returns per unit of risk. Hyundai Motor is currently generating about -0.02 per unit of volatility. If you would invest  23,101,800  in Hyundai Motor on December 5, 2024 and sell it today you would lose (4,071,800) from holding Hyundai Motor or give up 17.63% of portfolio value over 90 days.

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

SK Holdings Co  vs.  Hyundai Motor

SK Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SK Holdings Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hyundai Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hyundai Motor 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 SK Holdings and Hyundai

The main advantage of trading using opposite SK Holdings and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SK Holdings 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 SK Holdings Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.