Correlation Between Alphabet and Hyundai

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

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

Diversification Opportunities for Alphabet and Hyundai

0.62

Correlation Coefficient

Alphabet  Hyundai

Poor diversification

The 3 months correlation between Alphabet and Hyundai is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor and Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Hyundai go up and down completely randomly.

Pair Corralation between Alphabet and Hyundai

Given the investment horizon of 90 days Alphabet is expected to generate 1.39 times less return on investment than Hyundai. But when comparing it to its historical volatility, Alphabet Inc Class C is 1.79 times less risky than Hyundai. It trades about 0.19 of its potential returns per unit of risk. Hyundai Motor is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,280  in Hyundai Motor on March 28, 2024 and sell it today you would earn a total of  340.00  from holding Hyundai Motor or generate 6.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.3%
Values	Daily Returns

Alphabet Inc Class C  vs.  Hyundai Motor

Alphabet Class C

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Hyundai Motor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hyundai Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hyundai may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Alphabet and Hyundai

The main advantage of trading using opposite Alphabet and Hyundai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.