Correlation Between SH Energy and Duksan Hi

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

By analyzing existing cross correlation between SH Energy Chemical and Duksan Hi Metal, you can compare the effects of market volatilities on SH Energy and Duksan Hi 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 SH Energy with a short position of Duksan Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of SH Energy and Duksan Hi.

Diversification Opportunities for SH Energy and Duksan Hi

0.08

Correlation Coefficient

SH Energy  Duksan Hi

Significant diversification

The 3 months correlation between 002360 and Duksan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding SH Energy Chemical and Duksan Hi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duksan Hi Metal and SH Energy 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 SH Energy Chemical are associated (or correlated) with Duksan Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duksan Hi Metal has no effect on the direction of SH Energy i.e., SH Energy and Duksan Hi go up and down completely randomly.

Pair Corralation between SH Energy and Duksan Hi

Assuming the 90 days trading horizon SH Energy Chemical is expected to generate 1.1 times more return on investment than Duksan Hi. However, SH Energy is 1.1 times more volatile than Duksan Hi Metal. It trades about 0.03 of its potential returns per unit of risk. Duksan Hi Metal is currently generating about -0.04 per unit of risk. If you would invest  51,100  in SH Energy Chemical on October 25, 2024 and sell it today you would earn a total of  1,900  from holding SH Energy Chemical or generate 3.72% return on investment over 90 days.

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

SH Energy Chemical  vs.  Duksan Hi Metal

SH Energy Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SH Energy Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SH Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Duksan Hi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duksan Hi Metal 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 SH Energy and Duksan Hi

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

The idea behind SH Energy Chemical and Duksan Hi Metal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.