Correlation Between Hyundai and Pentair PLC

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

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

Diversification Opportunities for Hyundai and Pentair PLC

-0.85

Correlation Coefficient

Hyundai  Pentair PLC

Pay attention - limited upside

The 3 months correlation between Hyundai and Pentair is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Hyundai i.e., Hyundai and Pentair PLC go up and down completely randomly.

Pair Corralation between Hyundai and Pentair PLC

Assuming the 90 days trading horizon Hyundai Motor is expected to generate 2.43 times more return on investment than Pentair PLC. However, Hyundai is 2.43 times more volatile than Pentair PLC. It trades about 0.06 of its potential returns per unit of risk. Pentair PLC is currently generating about 0.09 per unit of risk. If you would invest  5,160  in Hyundai Motor on September 14, 2024 and sell it today you would earn a total of  120.00  from holding Hyundai Motor or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Hyundai Motor  vs.  Pentair PLC

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.

Pentair PLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pentair PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and Pentair PLC

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

The idea behind Hyundai Motor and Pentair PLC 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.