Correlation Between Samhwa Paint and Samyang Foods

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

By analyzing existing cross correlation between Samhwa Paint Industrial and Samyang Foods Co, you can compare the effects of market volatilities on Samhwa Paint and Samyang Foods 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 Samhwa Paint with a short position of Samyang Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samhwa Paint and Samyang Foods.

Diversification Opportunities for Samhwa Paint and Samyang Foods

-0.33

Correlation Coefficient

Samhwa Paint  Samyang Foods

Very good diversification

The 3 months correlation between Samhwa and Samyang is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Samhwa Paint Industrial and Samyang Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samyang Foods and Samhwa Paint 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 Samhwa Paint Industrial are associated (or correlated) with Samyang Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samyang Foods has no effect on the direction of Samhwa Paint i.e., Samhwa Paint and Samyang Foods go up and down completely randomly.

Pair Corralation between Samhwa Paint and Samyang Foods

Assuming the 90 days trading horizon Samhwa Paint is expected to generate 26.47 times less return on investment than Samyang Foods. But when comparing it to its historical volatility, Samhwa Paint Industrial is 1.45 times less risky than Samyang Foods. It trades about 0.02 of its potential returns per unit of risk. Samyang Foods Co is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  53,500,000  in Samyang Foods Co on September 21, 2024 and sell it today you would earn a total of  21,500,000  from holding Samyang Foods Co or generate 40.19% return on investment over 90 days.

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

Samhwa Paint Industrial  vs.  Samyang Foods Co

Samhwa Paint Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samhwa Paint Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Samhwa Paint is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samyang Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samyang Foods Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samyang Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samhwa Paint and Samyang Foods

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

The idea behind Samhwa Paint Industrial and Samyang Foods Co 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.