Correlation Between Hyundai Engineering and Automobile

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

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

Diversification Opportunities for Hyundai Engineering and Automobile

0.53

Correlation Coefficient

Hyundai Engineering  Automobile

Very weak diversification

The 3 months correlation between Hyundai and Automobile is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Engineering Plastics and Automobile Pc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automobile Pc and Hyundai Engineering 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 Engineering Plastics are associated (or correlated) with Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automobile Pc has no effect on the direction of Hyundai Engineering i.e., Hyundai Engineering and Automobile go up and down completely randomly.

Pair Corralation between Hyundai Engineering and Automobile

Assuming the 90 days trading horizon Hyundai Engineering Plastics is expected to under-perform the Automobile. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Engineering Plastics is 1.69 times less risky than Automobile. The stock trades about -0.02 of its potential returns per unit of risk. The Automobile Pc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  62,500  in Automobile Pc on September 19, 2024 and sell it today you would earn a total of  2,100  from holding Automobile Pc or generate 3.36% return on investment over 90 days.

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

Hyundai Engineering Plastics  vs.  Automobile Pc

Hyundai Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Engineering Plastics 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.

Automobile Pc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Automobile Pc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automobile 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 Engineering and Automobile

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

The idea behind Hyundai Engineering Plastics and Automobile Pc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.