Correlation Between Hyundai and Energy Revenue

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

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

Diversification Opportunities for Hyundai and Energy Revenue

-0.51

Correlation Coefficient

Hyundai  Energy Revenue

Excellent diversification

The 3 months correlation between Hyundai and Energy is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Energy Revenue Amer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Revenue Amer 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 Co are associated (or correlated) with Energy Revenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Revenue Amer has no effect on the direction of Hyundai i.e., Hyundai and Energy Revenue go up and down completely randomly.

Pair Corralation between Hyundai and Energy Revenue

Assuming the 90 days horizon Hyundai is expected to generate 24.98 times less return on investment than Energy Revenue. But when comparing it to its historical volatility, Hyundai Motor Co is 14.12 times less risky than Energy Revenue. It trades about 0.07 of its potential returns per unit of risk. Energy Revenue Amer is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3.30  in Energy Revenue Amer on September 12, 2024 and sell it today you would lose (0.30) from holding Energy Revenue Amer or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.58%
Values	Daily Returns

Hyundai Motor Co  vs.  Energy Revenue Amer

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor 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 nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Energy Revenue Amer

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Revenue Amer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Energy Revenue displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and Energy Revenue

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

The idea behind Hyundai Motor Co and Energy Revenue Amer 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.