Correlation Between SK Hynix and Visang Education

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

By analyzing existing cross correlation between SK Hynix and Visang Education, you can compare the effects of market volatilities on SK Hynix and Visang Education 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 SK Hynix with a short position of Visang Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of SK Hynix and Visang Education.

Diversification Opportunities for SK Hynix and Visang Education

0.52

Correlation Coefficient

SK Hynix  Visang Education

Very weak diversification

The 3 months correlation between 000660 and Visang is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and Visang Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visang Education and SK Hynix 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 SK Hynix are associated (or correlated) with Visang Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visang Education has no effect on the direction of SK Hynix i.e., SK Hynix and Visang Education go up and down completely randomly.

Pair Corralation between SK Hynix and Visang Education

Assuming the 90 days trading horizon SK Hynix is expected to generate 1.09 times less return on investment than Visang Education. But when comparing it to its historical volatility, SK Hynix is 1.72 times less risky than Visang Education. It trades about 0.06 of its potential returns per unit of risk. Visang Education is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  471,500  in Visang Education on September 13, 2024 and sell it today you would earn a total of  12,500  from holding Visang Education or generate 2.65% return on investment over 90 days.

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

SK Hynix  vs.  Visang Education

SK Hynix

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Visang Education

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Visang Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Visang Education sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Hynix and Visang Education

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

The idea behind SK Hynix and Visang Education 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.