Correlation Between Sam Yang and Korea Electric

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

By analyzing existing cross correlation between Sam Yang Foods and Korea Electric Power, you can compare the effects of market volatilities on Sam Yang and Korea Electric 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 Sam Yang with a short position of Korea Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sam Yang and Korea Electric.

Diversification Opportunities for Sam Yang and Korea Electric

-0.04

Correlation Coefficient

Sam Yang  Korea Electric

Good diversification

The 3 months correlation between Sam and Korea is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sam Yang Foods and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power and Sam Yang 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 Sam Yang Foods are associated (or correlated) with Korea Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of Sam Yang i.e., Sam Yang and Korea Electric go up and down completely randomly.

Pair Corralation between Sam Yang and Korea Electric

Assuming the 90 days trading horizon Sam Yang is expected to generate 1.67 times less return on investment than Korea Electric. In addition to that, Sam Yang is 1.57 times more volatile than Korea Electric Power. It trades about 0.03 of its total potential returns per unit of risk. Korea Electric Power is currently generating about 0.09 per unit of volatility. If you would invest  2,180,000  in Korea Electric Power on September 3, 2024 and sell it today you would earn a total of  210,000  from holding Korea Electric Power or generate 9.63% return on investment over 90 days.

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

Sam Yang Foods  vs.  Korea Electric Power

Sam Yang Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sam Yang Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sam Yang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Korea Electric Power

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Electric Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sam Yang and Korea Electric

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

The idea behind Sam Yang Foods and Korea Electric Power 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.