Correlation Between Hyundai and Eastern Michigan

Can any of the company-specific risk be diversified away by investing in both Hyundai and Eastern Michigan 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 Eastern Michigan 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 Eastern Michigan Financial, you can compare the effects of market volatilities on Hyundai and Eastern Michigan 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 Eastern Michigan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Eastern Michigan.

Diversification Opportunities for Hyundai and Eastern Michigan

0.4

Correlation Coefficient

Hyundai  Eastern Michigan

Very weak diversification

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

Pair Corralation between Hyundai and Eastern Michigan

Assuming the 90 days horizon Hyundai Motor Co is expected to generate 5.36 times more return on investment than Eastern Michigan. However, Hyundai is 5.36 times more volatile than Eastern Michigan Financial. It trades about 0.15 of its potential returns per unit of risk. Eastern Michigan Financial is currently generating about 0.44 per unit of risk. If you would invest  5,100  in Hyundai Motor Co on October 27, 2024 and sell it today you would earn a total of  420.00  from holding Hyundai Motor Co or generate 8.24% return on investment over 90 days.

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

Hyundai Motor Co  vs.  Eastern Michigan Financial

Hyundai Motor

Risk-Adjusted Performance

0 of 100

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.

Eastern Michigan Fin

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Michigan Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Eastern Michigan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hyundai and Eastern Michigan

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

The idea behind Hyundai Motor Co and Eastern Michigan Financial 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.