Correlation Between Hyundai and Farmers Bancorp

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

Diversification Opportunities for Hyundai and Farmers Bancorp

0.02

Correlation Coefficient

Hyundai  Farmers Bancorp

Significant diversification

The 3 months correlation between Hyundai and Farmers is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bancorp 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 Farmers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bancorp has no effect on the direction of Hyundai i.e., Hyundai and Farmers Bancorp go up and down completely randomly.

Pair Corralation between Hyundai and Farmers Bancorp

Assuming the 90 days horizon Hyundai Motor Co is expected to under-perform the Farmers Bancorp. In addition to that, Hyundai is 2.9 times more volatile than Farmers Bancorp. It trades about -0.01 of its total potential returns per unit of risk. Farmers Bancorp is currently generating about 0.1 per unit of volatility. If you would invest  3,563  in Farmers Bancorp on December 20, 2024 and sell it today you would earn a total of  137.00  from holding Farmers Bancorp or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.33%
Values	Daily Returns

Hyundai Motor Co  vs.  Farmers Bancorp

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.

Farmers Bancorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Farmers Bancorp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hyundai and Farmers Bancorp

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

The idea behind Hyundai Motor Co and Farmers Bancorp 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.