Correlation Between Hyundai and BC Bud

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

Diversification Opportunities for Hyundai and BC Bud

-0.71

Correlation Coefficient

Hyundai  BC Bud

Pay attention - limited upside

The 3 months correlation between Hyundai and BCBCF is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor Co and The BC Bud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Bud 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 BC Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Bud has no effect on the direction of Hyundai i.e., Hyundai and BC Bud go up and down completely randomly.

Pair Corralation between Hyundai and BC Bud

Assuming the 90 days horizon Hyundai is expected to generate 10.72 times less return on investment than BC Bud. But when comparing it to its historical volatility, Hyundai Motor Co is 11.63 times less risky than BC Bud. It trades about 0.07 of its potential returns per unit of risk. The BC Bud is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.08  in The BC Bud on September 3, 2024 and sell it today you would earn a total of  1.47  from holding The BC Bud or generate 47.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Hyundai Motor Co  vs.  The BC Bud

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 fragile 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.

BC Bud

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, BC Bud reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hyundai and BC Bud

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

The idea behind Hyundai Motor Co and The BC Bud 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.