Correlation Between Hyundai and Energy

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

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

Diversification Opportunities for Hyundai and Energy

0.4

Correlation Coefficient

Hyundai  Energy

Very weak diversification

The 3 months correlation between Hyundai and Energy is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Energy and Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy and Water and Hyundai 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 Motor Co are associated (or correlated) with Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy and Water has no effect on the direction of Hyundai i.e., Hyundai and Energy go up and down completely randomly.

Pair Corralation between Hyundai and Energy

Assuming the 90 days horizon Hyundai is expected to generate 8.16 times less return on investment than Energy. But when comparing it to its historical volatility, Hyundai Motor Co is 5.82 times less risky than Energy. It trades about 0.01 of its potential returns per unit of risk. Energy and Water is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.38  in Energy and Water on December 29, 2024 and sell it today you would lose (0.16) from holding Energy and Water or give up 42.11% of portfolio value over 90 days.

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

Hyundai Motor Co  vs.  Energy and Water

Hyundai Motor

Risk-Adjusted Performance

Very Weak

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

Energy and Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy and Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile basic indicators, Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hyundai and Energy

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

The idea behind Hyundai Motor Co and Energy and Water 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..