Correlation Between Hyundai and Farmers

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

Diversification Opportunities for Hyundai and Farmers

-0.58

Correlation Coefficient

Hyundai  Farmers

Excellent diversification

The 3 months correlation between Hyundai and Farmers is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Farmers And Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers And Merchants 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 Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers And Merchants has no effect on the direction of Hyundai i.e., Hyundai and Farmers go up and down completely randomly.

Pair Corralation between Hyundai and Farmers

Assuming the 90 days horizon Hyundai Motor Co is expected to generate 1.25 times more return on investment than Farmers. However, Hyundai is 1.25 times more volatile than Farmers And Merchants. It trades about -0.05 of its potential returns per unit of risk. Farmers And Merchants is currently generating about -0.23 per unit of risk. If you would invest  5,781  in Hyundai Motor Co on January 29, 2024 and sell it today you would lose (243.00) from holding Hyundai Motor Co or give up 4.2% of portfolio value over 90 days.

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

Hyundai Motor Co  vs.  Farmers And Merchants

Hyundai Motor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Motor Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hyundai reported solid returns over the last few months and may actually be approaching a breakup point.

Farmers And Merchants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmers And Merchants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Hyundai and Farmers

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

The idea behind Hyundai Motor Co and Farmers And Merchants 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.