Correlation Between Hyundai and GROUNDS REST

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

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

Diversification Opportunities for Hyundai and GROUNDS REST

-0.34

Correlation Coefficient

Hyundai  GROUNDS REST

Very good diversification

The 3 months correlation between Hyundai and GROUNDS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and GROUNDS REST NA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GROUNDS REST NA 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 GROUNDS REST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GROUNDS REST NA has no effect on the direction of Hyundai i.e., Hyundai and GROUNDS REST go up and down completely randomly.

Pair Corralation between Hyundai and GROUNDS REST

Assuming the 90 days horizon Hyundai is expected to generate 5.21 times less return on investment than GROUNDS REST. But when comparing it to its historical volatility, Hyundai Motor is 9.44 times less risky than GROUNDS REST. It trades about 0.6 of its potential returns per unit of risk. GROUNDS REST NA is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  112.00  in GROUNDS REST NA on October 16, 2024 and sell it today you would earn a total of  55.00  from holding GROUNDS REST NA or generate 49.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.25%
Values	Daily Returns

Hyundai Motor  vs.  GROUNDS REST NA

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GROUNDS REST NA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GROUNDS REST NA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, GROUNDS REST reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and GROUNDS REST

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

The idea behind Hyundai Motor and GROUNDS REST NA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.