Correlation Between Waste Management and Hyundai

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

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

Diversification Opportunities for Waste Management and Hyundai

-0.45

Correlation Coefficient

Waste Management  Hyundai

Very good diversification

The 3 months correlation between Waste and Hyundai is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Hyundai go up and down completely randomly.

Pair Corralation between Waste Management and Hyundai

Assuming the 90 days trading horizon Waste Management is expected to generate 2.43 times less return on investment than Hyundai. But when comparing it to its historical volatility, Waste Management is 2.02 times less risky than Hyundai. It trades about 0.06 of its potential returns per unit of risk. Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,745  in Hyundai Motor on September 27, 2024 and sell it today you would earn a total of  2,535  from holding Hyundai Motor or generate 92.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Waste Management  vs.  Hyundai Motor

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Waste Management and Hyundai

The main advantage of trading using opposite Waste Management and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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 Waste Management 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.