Correlation Between Sung Bo and Kyeryong Construction

Can any of the company-specific risk be diversified away by investing in both Sung Bo and Kyeryong Construction 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 Sung Bo and Kyeryong Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sung Bo Chemicals and Kyeryong Construction Industrial, you can compare the effects of market volatilities on Sung Bo and Kyeryong Construction 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 Sung Bo with a short position of Kyeryong Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sung Bo and Kyeryong Construction.

Diversification Opportunities for Sung Bo and Kyeryong Construction

0.68

Correlation Coefficient

Sung Bo  Kyeryong Construction

Poor diversification

The 3 months correlation between Sung and Kyeryong is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sung Bo Chemicals and Kyeryong Construction Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyeryong Construction and Sung Bo 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 Sung Bo Chemicals are associated (or correlated) with Kyeryong Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyeryong Construction has no effect on the direction of Sung Bo i.e., Sung Bo and Kyeryong Construction go up and down completely randomly.

Pair Corralation between Sung Bo and Kyeryong Construction

Assuming the 90 days trading horizon Sung Bo is expected to generate 1.12 times less return on investment than Kyeryong Construction. But when comparing it to its historical volatility, Sung Bo Chemicals is 1.6 times less risky than Kyeryong Construction. It trades about 0.3 of its potential returns per unit of risk. Kyeryong Construction Industrial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,200,000  in Kyeryong Construction Industrial on October 8, 2024 and sell it today you would earn a total of  78,000  from holding Kyeryong Construction Industrial or generate 6.5% return on investment over 90 days.

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

Sung Bo Chemicals  vs.  Kyeryong Construction Industri

Sung Bo Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kyeryong Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyeryong Construction Industrial 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 Sung Bo and Kyeryong Construction

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

The idea behind Sung Bo Chemicals and Kyeryong Construction Industrial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.