Correlation Between Hyundai and PERRIGO

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

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

Diversification Opportunities for Hyundai and PERRIGO

0.59

Correlation Coefficient

Hyundai  PERRIGO

Very weak diversification

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

Pair Corralation between Hyundai and PERRIGO

Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the PERRIGO. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 3.71 times less risky than PERRIGO. The stock trades about -0.11 of its potential returns per unit of risk. The PERRIGO is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  80.00  in PERRIGO on September 30, 2024 and sell it today you would lose (11.00) from holding PERRIGO or give up 13.75% of portfolio value over 90 days.

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

Hyundai Motor  vs.  PERRIGO

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

PERRIGO

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hyundai and PERRIGO

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

The idea behind Hyundai Motor and PERRIGO 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.