Correlation Between Hyundai and American Green

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

Diversification Opportunities for Hyundai and American Green

-0.08

Correlation Coefficient

Hyundai  American Green

Good diversification

The 3 months correlation between Hyundai and American is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and American Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Green 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 American Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Green has no effect on the direction of Hyundai i.e., Hyundai and American Green go up and down completely randomly.

Pair Corralation between Hyundai and American Green

Assuming the 90 days horizon Hyundai is expected to generate 116.14 times less return on investment than American Green. But when comparing it to its historical volatility, Hyundai Motor Co is 6.81 times less risky than American Green. It trades about 0.0 of its potential returns per unit of risk. American Green is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.05  in American Green on December 2, 2024 and sell it today you would lose (0.01) from holding American Green or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Hyundai Motor Co  vs.  American Green

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.

American Green

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and American Green

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

The idea behind Hyundai Motor Co and American Green 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.