Correlation Between Hyundai and GSTechnologies

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

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

Diversification Opportunities for Hyundai and GSTechnologies

-0.89

Correlation Coefficient

Hyundai  GSTechnologies

Pay attention - limited upside

The 3 months correlation between Hyundai and GSTechnologies is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and GSTechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSTechnologies 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 GSTechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSTechnologies has no effect on the direction of Hyundai i.e., Hyundai and GSTechnologies go up and down completely randomly.

Pair Corralation between Hyundai and GSTechnologies

Assuming the 90 days trading horizon Hyundai Motor is expected to under-perform the GSTechnologies. But the stock apears to be less risky and, when comparing its historical volatility, Hyundai Motor is 2.94 times less risky than GSTechnologies. The stock trades about -0.09 of its potential returns per unit of risk. The GSTechnologies is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  137.00  in GSTechnologies on September 23, 2024 and sell it today you would earn a total of  41.00  from holding GSTechnologies or generate 29.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Hyundai Motor  vs.  GSTechnologies

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.

GSTechnologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and GSTechnologies

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

The idea behind Hyundai Motor and GSTechnologies 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.