Correlation Between Hyundai and AlzChem Group

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

By analyzing existing cross correlation between Hyundai Motor and AlzChem Group AG, you can compare the effects of market volatilities on Hyundai and AlzChem Group 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 AlzChem Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and AlzChem Group.

Diversification Opportunities for Hyundai and AlzChem Group

-0.59

Correlation Coefficient

Hyundai  AlzChem Group

Excellent diversification

The 3 months correlation between Hyundai and AlzChem is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and AlzChem Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlzChem Group AG 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 are associated (or correlated) with AlzChem Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlzChem Group AG has no effect on the direction of Hyundai i.e., Hyundai and AlzChem Group go up and down completely randomly.

Pair Corralation between Hyundai and AlzChem Group

Assuming the 90 days horizon Hyundai is expected to generate 1.95 times less return on investment than AlzChem Group. But when comparing it to its historical volatility, Hyundai Motor is 1.08 times less risky than AlzChem Group. It trades about 0.07 of its potential returns per unit of risk. AlzChem Group AG is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,460  in AlzChem Group AG on September 16, 2024 and sell it today you would earn a total of  4,260  from holding AlzChem Group AG or generate 291.78% return on investment over 90 days.

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

Hyundai Motor  vs.  AlzChem Group AG

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AlzChem Group AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AlzChem Group AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AlzChem Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and AlzChem Group

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

The idea behind Hyundai Motor and AlzChem Group AG 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.