Correlation Between Hyundai and Isuzu Motors

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

Diversification Opportunities for Hyundai and Isuzu Motors

0.74

Correlation Coefficient

Hyundai  Isuzu Motors

Poor diversification

The 3 months correlation between Hyundai and Isuzu is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and Isuzu Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isuzu Motors 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 Isuzu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isuzu Motors has no effect on the direction of Hyundai i.e., Hyundai and Isuzu Motors go up and down completely randomly.

Pair Corralation between Hyundai and Isuzu Motors

Assuming the 90 days horizon Hyundai Motor Co is expected to generate 1.65 times more return on investment than Isuzu Motors. However, Hyundai is 1.65 times more volatile than Isuzu Motors. It trades about -0.07 of its potential returns per unit of risk. Isuzu Motors is currently generating about -0.13 per unit of risk. If you would invest  6,294  in Hyundai Motor Co on August 25, 2024 and sell it today you would lose (759.00) from holding Hyundai Motor Co or give up 12.06% of portfolio value over 90 days.

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

Hyundai Motor Co  vs.  Isuzu Motors

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Isuzu Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Isuzu Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hyundai and Isuzu Motors

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

The idea behind Hyundai Motor Co and Isuzu Motors 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.