Correlation Between Balfour Beatty and Hyundai

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

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

Diversification Opportunities for Balfour Beatty and Hyundai

-0.52

Correlation Coefficient

Balfour Beatty  Hyundai

Excellent diversification

The 3 months correlation between Balfour and Hyundai is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Balfour Beatty plc and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Balfour Beatty 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 Balfour Beatty plc are associated (or correlated) with Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Balfour Beatty i.e., Balfour Beatty and Hyundai go up and down completely randomly.

Pair Corralation between Balfour Beatty and Hyundai

Assuming the 90 days trading horizon Balfour Beatty is expected to generate 2.04 times less return on investment than Hyundai. But when comparing it to its historical volatility, Balfour Beatty plc is 1.61 times less risky than Hyundai. It trades about 0.05 of its potential returns per unit of risk. Hyundai Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,821  in Hyundai Motor on September 28, 2024 and sell it today you would earn a total of  2,459  from holding Hyundai Motor or generate 87.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Balfour Beatty plc  vs.  Hyundai Motor

Balfour Beatty plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Balfour Beatty plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Balfour Beatty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Balfour Beatty and Hyundai

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

The idea behind Balfour Beatty plc and Hyundai Motor 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.