Correlation Between Shinil Industrial and Korea Steel

Can any of the company-specific risk be diversified away by investing in both Shinil Industrial and Korea Steel 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 Shinil Industrial and Korea Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Shinil Industrial and Korea Steel

0.3

Correlation Coefficient

Shinil Industrial  Korea Steel

Weak diversification

The 3 months correlation between Shinil and Korea is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shinil Industrial Co and Korea Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Steel and Shinil Industrial 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 Shinil Industrial Co are associated (or correlated) with Korea Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Steel has no effect on the direction of Shinil Industrial i.e., Shinil Industrial and Korea Steel go up and down completely randomly.

Pair Corralation between Shinil Industrial and Korea Steel

Assuming the 90 days trading horizon Shinil Industrial is expected to generate 3.38 times less return on investment than Korea Steel. But when comparing it to its historical volatility, Shinil Industrial Co is 1.49 times less risky than Korea Steel. It trades about 0.3 of its potential returns per unit of risk. Korea Steel Co is currently generating about 0.68 of returns per unit of risk over similar time horizon. If you would invest  122,700  in Korea Steel Co on October 8, 2024 and sell it today you would earn a total of  46,200  from holding Korea Steel Co or generate 37.65% return on investment over 90 days.

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

Shinil Industrial Co  vs.  Korea Steel Co

Shinil Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Korea Steel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Steel Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinil Industrial and Korea Steel

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

The idea behind Shinil Industrial Co and Korea Steel 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.