Correlation Between Hyundai and Hanwha InvestmentSecuri

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

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

Diversification Opportunities for Hyundai and Hanwha InvestmentSecuri

-0.7

Correlation Coefficient

Hyundai  Hanwha InvestmentSecuri

Excellent diversification

The 3 months correlation between Hyundai and Hanwha is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Hanwha InvestmentSecurities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha InvestmentSecuri 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 Hanwha InvestmentSecuri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha InvestmentSecuri has no effect on the direction of Hyundai i.e., Hyundai and Hanwha InvestmentSecuri go up and down completely randomly.

Pair Corralation between Hyundai and Hanwha InvestmentSecuri

Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.39 times more return on investment than Hanwha InvestmentSecuri. However, Hyundai Motor is 2.6 times less risky than Hanwha InvestmentSecuri. It trades about 0.16 of its potential returns per unit of risk. Hanwha InvestmentSecurities Co is currently generating about -0.11 per unit of risk. If you would invest  20,150,000  in Hyundai Motor on September 15, 2024 and sell it today you would earn a total of  1,350,000  from holding Hyundai Motor or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hyundai Motor  vs.  Hanwha InvestmentSecurities Co

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. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hanwha InvestmentSecuri

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha InvestmentSecurities Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha InvestmentSecuri sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and Hanwha InvestmentSecuri

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

The idea behind Hyundai Motor and Hanwha InvestmentSecurities 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.