Correlation Between Sung Bo and Miwon Chemical

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

Diversification Opportunities for Sung Bo and Miwon Chemical

0.57

Correlation Coefficient

Sung Bo  Miwon Chemical

Very weak diversification

The 3 months correlation between Sung and Miwon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sung Bo Chemicals and Miwon Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemical 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 Miwon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemical has no effect on the direction of Sung Bo i.e., Sung Bo and Miwon Chemical go up and down completely randomly.

Pair Corralation between Sung Bo and Miwon Chemical

Assuming the 90 days trading horizon Sung Bo Chemicals is expected to generate 0.73 times more return on investment than Miwon Chemical. However, Sung Bo Chemicals is 1.38 times less risky than Miwon Chemical. It trades about 0.03 of its potential returns per unit of risk. Miwon Chemical is currently generating about -0.07 per unit of risk. If you would invest  249,739  in Sung Bo Chemicals on October 1, 2024 and sell it today you would earn a total of  3,261  from holding Sung Bo Chemicals or generate 1.31% return on investment over 90 days.

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

Sung Bo Chemicals  vs.  Miwon Chemical

Sung Bo Chemicals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sung Bo Chemicals are ranked lower than 2 (%) 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.

Miwon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Miwon Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Miwon Chemical 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 Miwon Chemical

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

The idea behind Sung Bo Chemicals and Miwon Chemical 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.