Correlation Between Hyundai and Jayjun

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

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

Diversification Opportunities for Hyundai and Jayjun

0.8

Correlation Coefficient

Hyundai  Jayjun

Very poor diversification

The 3 months correlation between Hyundai and Jayjun is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Jayjun Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jayjun 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 Jayjun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jayjun has no effect on the direction of Hyundai i.e., Hyundai and Jayjun go up and down completely randomly.

Pair Corralation between Hyundai and Jayjun

Assuming the 90 days trading horizon Hyundai Motor is expected to generate 0.94 times more return on investment than Jayjun. However, Hyundai Motor is 1.07 times less risky than Jayjun. It trades about -0.03 of its potential returns per unit of risk. Jayjun Co is currently generating about -0.1 per unit of risk. If you would invest  22,723,200  in Hyundai Motor on September 5, 2024 and sell it today you would lose (1,273,200) from holding Hyundai Motor or give up 5.6% of portfolio value over 90 days.

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

Hyundai Motor  vs.  Jayjun 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 somewhat strong basic indicators, Hyundai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jayjun

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jayjun Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hyundai and Jayjun

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

The idea behind Hyundai Motor and Jayjun 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.