Correlation Between Sung Bo and Jeil Steel

Can any of the company-specific risk be diversified away by investing in both Sung Bo and Jeil 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 Sung Bo and Jeil Steel 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 Jeil Steel Mfg, you can compare the effects of market volatilities on Sung Bo and Jeil 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 Sung Bo with a short position of Jeil Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sung Bo and Jeil Steel.

Diversification Opportunities for Sung Bo and Jeil Steel

-0.65

Correlation Coefficient

Sung Bo  Jeil Steel

Excellent diversification

The 3 months correlation between Sung and Jeil is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sung Bo Chemicals and Jeil Steel Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeil Steel Mfg 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 Jeil Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeil Steel Mfg has no effect on the direction of Sung Bo i.e., Sung Bo and Jeil Steel go up and down completely randomly.

Pair Corralation between Sung Bo and Jeil Steel

Assuming the 90 days trading horizon Sung Bo Chemicals is expected to under-perform the Jeil Steel. But the stock apears to be less risky and, when comparing its historical volatility, Sung Bo Chemicals is 3.1 times less risky than Jeil Steel. The stock trades about -0.01 of its potential returns per unit of risk. The Jeil Steel Mfg is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  261,000  in Jeil Steel Mfg on October 27, 2024 and sell it today you would lose (106,000) from holding Jeil Steel Mfg or give up 40.61% of portfolio value over 90 days.

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

Sung Bo Chemicals  vs.  Jeil Steel Mfg

Sung Bo Chemicals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sung Bo Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Jeil Steel Mfg

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sung Bo and Jeil Steel

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

The idea behind Sung Bo Chemicals and Jeil Steel Mfg 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.