Correlation Between Visa and Hyundai Development

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

By analyzing existing cross correlation between Visa Class A and Hyundai Development Co, you can compare the effects of market volatilities on Visa and Hyundai Development 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 Visa with a short position of Hyundai Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Hyundai Development.

Diversification Opportunities for Visa and Hyundai Development

0.77

Correlation Coefficient

Visa  Hyundai Development

Poor diversification

The 3 months correlation between Visa and Hyundai is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hyundai Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Development and Visa 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 Visa Class A are associated (or correlated) with Hyundai Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Development has no effect on the direction of Visa i.e., Visa and Hyundai Development go up and down completely randomly.

Pair Corralation between Visa and Hyundai Development

Taking into account the 90-day investment horizon Visa is expected to generate 5.96 times less return on investment than Hyundai Development. In addition to that, Visa is 1.01 times more volatile than Hyundai Development Co. It trades about 0.09 of its total potential returns per unit of risk. Hyundai Development Co is currently generating about 0.51 per unit of volatility. If you would invest  1,124,000  in Hyundai Development Co on October 9, 2024 and sell it today you would earn a total of  106,000  from holding Hyundai Development Co or generate 9.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Visa Class A  vs.  Hyundai Development Co

Visa Class A

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Hyundai Development

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Development Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hyundai Development may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Visa and Hyundai Development

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

The idea behind Visa Class A and Hyundai Development Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.