Correlation Between Hyundai and Franchise

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

Diversification Opportunities for Hyundai and Franchise

-0.57

Correlation Coefficient

Hyundai  Franchise

Excellent diversification

The 3 months correlation between Hyundai and Franchise is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Franchise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franchise Group 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 Franchise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franchise Group has no effect on the direction of Hyundai i.e., Hyundai and Franchise go up and down completely randomly.

Pair Corralation between Hyundai and Franchise

Assuming the 90 days horizon Hyundai is expected to generate 1.03 times less return on investment than Franchise. In addition to that, Hyundai is 1.14 times more volatile than Franchise Group. It trades about 0.07 of its total potential returns per unit of risk. Franchise Group is currently generating about 0.08 per unit of volatility. If you would invest  1,996  in Franchise Group on September 3, 2024 and sell it today you would earn a total of  497.00  from holding Franchise Group or generate 24.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	30.91%
Values	Daily Returns

Hyundai Motor Co  vs.  Franchise Group

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franchise Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Franchise is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hyundai and Franchise

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

The idea behind Hyundai Motor Co and Franchise Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.