Correlation Between Sangsangin Investment and Daejung Chemicals

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

By analyzing existing cross correlation between Sangsangin Investment Securities and Daejung Chemicals Metals, you can compare the effects of market volatilities on Sangsangin Investment and Daejung Chemicals 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 Sangsangin Investment with a short position of Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sangsangin Investment and Daejung Chemicals.

Diversification Opportunities for Sangsangin Investment and Daejung Chemicals

0.84

Correlation Coefficient

Sangsangin Investment  Daejung Chemicals

Very poor diversification

The 3 months correlation between Sangsangin and Daejung is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sangsangin Investment Securiti and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals and Sangsangin Investment 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 Sangsangin Investment Securities are associated (or correlated) with Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of Sangsangin Investment i.e., Sangsangin Investment and Daejung Chemicals go up and down completely randomly.

Pair Corralation between Sangsangin Investment and Daejung Chemicals

Assuming the 90 days trading horizon Sangsangin Investment is expected to generate 10.06 times less return on investment than Daejung Chemicals. But when comparing it to its historical volatility, Sangsangin Investment Securities is 1.42 times less risky than Daejung Chemicals. It trades about 0.02 of its potential returns per unit of risk. Daejung Chemicals Metals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,220,712  in Daejung Chemicals Metals on October 6, 2024 and sell it today you would earn a total of  87,288  from holding Daejung Chemicals Metals or generate 7.15% return on investment over 90 days.

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

Sangsangin Investment Securiti  vs.  Daejung Chemicals Metals

Sangsangin Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sangsangin Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Daejung Chemicals Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejung Chemicals Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sangsangin Investment and Daejung Chemicals

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

The idea behind Sangsangin Investment Securities and Daejung Chemicals Metals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.