Correlation Between Hyundai Home and Lotte Data

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

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

Diversification Opportunities for Hyundai Home and Lotte Data

0.33

Correlation Coefficient

Hyundai Home  Lotte Data

Weak diversification

The 3 months correlation between Hyundai and Lotte is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Home Shopping and Lotte Data Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Data Communication and Hyundai Home 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 Home Shopping are associated (or correlated) with Lotte Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Data Communication has no effect on the direction of Hyundai Home i.e., Hyundai Home and Lotte Data go up and down completely randomly.

Pair Corralation between Hyundai Home and Lotte Data

Assuming the 90 days trading horizon Hyundai Home Shopping is expected to generate 0.94 times more return on investment than Lotte Data. However, Hyundai Home Shopping is 1.07 times less risky than Lotte Data. It trades about 0.14 of its potential returns per unit of risk. Lotte Data Communication is currently generating about 0.03 per unit of risk. If you would invest  4,480,000  in Hyundai Home Shopping on December 1, 2024 and sell it today you would earn a total of  730,000  from holding Hyundai Home Shopping or generate 16.29% return on investment over 90 days.

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

Hyundai Home Shopping  vs.  Lotte Data Communication

Hyundai Home Shopping

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Home Shopping are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Lotte Data Communication

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lotte Data Communication are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lotte Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hyundai Home and Lotte Data

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

The idea behind Hyundai Home Shopping and Lotte Data Communication 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.