Correlation Between Shinil Industrial and Korea Information

Can any of the company-specific risk be diversified away by investing in both Shinil Industrial and Korea Information 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 Information 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 Information Engineering, you can compare the effects of market volatilities on Shinil Industrial and Korea Information 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 Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinil Industrial and Korea Information.

Diversification Opportunities for Shinil Industrial and Korea Information

-0.03

Correlation Coefficient

Shinil Industrial  Korea Information

Good diversification

The 3 months correlation between Shinil and Korea is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Shinil Industrial Co and Korea Information Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Information 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 Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Information has no effect on the direction of Shinil Industrial i.e., Shinil Industrial and Korea Information go up and down completely randomly.

Pair Corralation between Shinil Industrial and Korea Information

Assuming the 90 days trading horizon Shinil Industrial Co is expected to under-perform the Korea Information. But the stock apears to be less risky and, when comparing its historical volatility, Shinil Industrial Co is 1.7 times less risky than Korea Information. The stock trades about -0.02 of its potential returns per unit of risk. The Korea Information Engineering is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  266,500  in Korea Information Engineering on October 23, 2024 and sell it today you would lose (5,000) from holding Korea Information Engineering or give up 1.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Shinil Industrial Co  vs.  Korea Information Engineering

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 Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shinil Industrial and Korea Information

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

The idea behind Shinil Industrial Co and Korea Information Engineering 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.