Correlation Between Hyundai and Oracle

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

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

Diversification Opportunities for Hyundai and Oracle

-0.38

Correlation Coefficient

Hyundai  Oracle

Very good diversification

The 3 months correlation between Hyundai and Oracle is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Hyundai i.e., Hyundai and Oracle go up and down completely randomly.

Pair Corralation between Hyundai and Oracle

Assuming the 90 days horizon Hyundai is expected to generate 1.03 times less return on investment than Oracle. In addition to that, Hyundai is 1.16 times more volatile than Oracle. It trades about 0.06 of its total potential returns per unit of risk. Oracle is currently generating about 0.08 per unit of volatility. If you would invest  7,958  in Oracle on October 15, 2024 and sell it today you would earn a total of  7,196  from holding Oracle or generate 90.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.8%
Values	Daily Returns

Hyundai Motor  vs.  Oracle

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.

Oracle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oracle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Oracle is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hyundai and Oracle

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

The idea behind Hyundai Motor and Oracle 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.