Correlation Between Hyundai and Hannover Rck

Can any of the company-specific risk be diversified away by investing in both Hyundai and Hannover Rck 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 Hannover Rck 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 Hannover Rck SE, you can compare the effects of market volatilities on Hyundai and Hannover Rck 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 Hannover Rck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Hannover Rck.

Diversification Opportunities for Hyundai and Hannover Rck

-0.87

Correlation Coefficient

Hyundai  Hannover Rck

Pay attention - limited upside

The 3 months correlation between Hyundai and Hannover is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Hannover Rck SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannover Rck SE 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 Hannover Rck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannover Rck SE has no effect on the direction of Hyundai i.e., Hyundai and Hannover Rck go up and down completely randomly.

Pair Corralation between Hyundai and Hannover Rck

Assuming the 90 days horizon Hyundai Motor Co is expected to under-perform the Hannover Rck. In addition to that, Hyundai is 1.73 times more volatile than Hannover Rck SE. It trades about -0.04 of its total potential returns per unit of risk. Hannover Rck SE is currently generating about 0.1 per unit of volatility. If you would invest  25,522  in Hannover Rck SE on September 19, 2024 and sell it today you would earn a total of  783.00  from holding Hannover Rck SE or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Hyundai Motor Co  vs.  Hannover Rck SE

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.

Hannover Rck SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hannover Rck SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hannover Rck reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and Hannover Rck

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

The idea behind Hyundai Motor Co and Hannover Rck SE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.