Correlation Between MERCEDES-BENZ GRP and Hyundai

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

By analyzing existing cross correlation between MERCEDES BENZ GRP ADR14 and Hyundai Motor, you can compare the effects of market volatilities on MERCEDES-BENZ GRP 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 MERCEDES-BENZ GRP with a short position of Hyundai. Check out your portfolio center. Please also check ongoing floating volatility patterns of MERCEDES-BENZ GRP and Hyundai.

Diversification Opportunities for MERCEDES-BENZ GRP and Hyundai

0.71

Correlation Coefficient

MERCEDES-BENZ GRP  Hyundai

Poor diversification

The 3 months correlation between MERCEDES-BENZ and Hyundai is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MERCEDES BENZ GRP ADR14 and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and MERCEDES-BENZ GRP 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 MERCEDES BENZ GRP ADR14 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 MERCEDES-BENZ GRP i.e., MERCEDES-BENZ GRP and Hyundai go up and down completely randomly.

Pair Corralation between MERCEDES-BENZ GRP and Hyundai

Assuming the 90 days trading horizon MERCEDES BENZ GRP ADR14 is expected to generate 1.08 times more return on investment than Hyundai. However, MERCEDES-BENZ GRP is 1.08 times more volatile than Hyundai Motor. It trades about 0.01 of its potential returns per unit of risk. Hyundai Motor is currently generating about -0.11 per unit of risk. If you would invest  1,390  in MERCEDES BENZ GRP ADR14 on September 17, 2024 and sell it today you would lose (10.00) from holding MERCEDES BENZ GRP ADR14 or give up 0.72% of portfolio value over 90 days.

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

MERCEDES BENZ GRP ADR14  vs.  Hyundai Motor

MERCEDES BENZ GRP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MERCEDES BENZ GRP ADR14 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, MERCEDES-BENZ GRP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MERCEDES-BENZ GRP and Hyundai

The main advantage of trading using opposite MERCEDES-BENZ GRP and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MERCEDES-BENZ GRP 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 MERCEDES BENZ GRP ADR14 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.