Correlation Between Hyundai CF and LB Investment

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

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

Diversification Opportunities for Hyundai CF and LB Investment

0.71

Correlation Coefficient

Hyundai CF  LB Investment

Poor diversification

The 3 months correlation between Hyundai and 309960 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai CF and LB Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Investment and Hyundai CF 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 CF are associated (or correlated) with LB Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Investment has no effect on the direction of Hyundai CF i.e., Hyundai CF and LB Investment go up and down completely randomly.

Pair Corralation between Hyundai CF and LB Investment

Assuming the 90 days trading horizon Hyundai CF is expected to generate 11.6 times less return on investment than LB Investment. But when comparing it to its historical volatility, Hyundai CF is 7.28 times less risky than LB Investment. It trades about 0.06 of its potential returns per unit of risk. LB Investment is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  304,500  in LB Investment on December 25, 2024 and sell it today you would earn a total of  63,500  from holding LB Investment or generate 20.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Hyundai CF  vs.  LB Investment

Hyundai CF

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai CF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hyundai CF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LB Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LB Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LB Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai CF and LB Investment

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

The idea behind Hyundai CF and LB Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.