Correlation Between Hyundai and Air Products

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Can any of the company-specific risk be diversified away by investing in both Hyundai and Air Products 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 Products 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 Products Chemicals, you can compare the effects of market volatilities on Hyundai and Air Products 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 Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Air Products.

Diversification Opportunities for Hyundai and Air Products

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Hyundai and Air is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals 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 Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Hyundai i.e., Hyundai and Air Products go up and down completely randomly.

Pair Corralation between Hyundai and Air Products

Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the Air Products. In addition to that, Hyundai is 1.46 times more volatile than Air Products Chemicals. It trades about -0.08 of its total potential returns per unit of risk. Air Products Chemicals is currently generating about 0.16 per unit of volatility. If you would invest  27,298  in Air Products Chemicals on September 10, 2024 and sell it today you would earn a total of  4,978  from holding Air Products Chemicals or generate 18.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Hyundai Motor  vs.  Air Products Chemicals

 Performance 
       Timeline  
Hyundai Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Air Products Chemicals 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Air Products unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hyundai and Air Products Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hyundai and Air Products

The main advantage of trading using opposite Hyundai and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Air Products 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 Products will offset losses from the drop in Air Products' long position.
The idea behind Hyundai Motor and Air Products Chemicals 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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