Correlation Between Hyundai and Air China

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

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

Diversification Opportunities for Hyundai and Air China

0.0

Correlation Coefficient

Hyundai  Air China

Pay attention - limited upside

The 3 months correlation between Hyundai and Air is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of Hyundai i.e., Hyundai and Air China go up and down completely randomly.

Pair Corralation between Hyundai and Air China

If you would invest  59.00  in Air China Limited on September 23, 2024 and sell it today you would earn a total of  4.00  from holding Air China Limited or generate 6.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Hyundai Motor  vs.  Air China Limited

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 comparatively stable basic indicators, Hyundai is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Air China Limited

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air China Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and Air China

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

The idea behind Hyundai Motor and Air China Limited 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.