Correlation Between Songwon Industrial and Kyung Chang

Can any of the company-specific risk be diversified away by investing in both Songwon Industrial and Kyung Chang 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 Songwon Industrial and Kyung Chang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Songwon Industrial Co and Kyung Chang Industrial, you can compare the effects of market volatilities on Songwon Industrial and Kyung Chang 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 Songwon Industrial with a short position of Kyung Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Songwon Industrial and Kyung Chang.

Diversification Opportunities for Songwon Industrial and Kyung Chang

0.85

Correlation Coefficient

Songwon Industrial  Kyung Chang

Very poor diversification

The 3 months correlation between Songwon and Kyung is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Songwon Industrial Co and Kyung Chang Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kyung Chang Industrial and Songwon 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 Songwon Industrial Co are associated (or correlated) with Kyung Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kyung Chang Industrial has no effect on the direction of Songwon Industrial i.e., Songwon Industrial and Kyung Chang go up and down completely randomly.

Pair Corralation between Songwon Industrial and Kyung Chang

Assuming the 90 days trading horizon Songwon Industrial Co is expected to under-perform the Kyung Chang. In addition to that, Songwon Industrial is 1.26 times more volatile than Kyung Chang Industrial. It trades about -0.13 of its total potential returns per unit of risk. Kyung Chang Industrial is currently generating about -0.05 per unit of volatility. If you would invest  211,897  in Kyung Chang Industrial on October 9, 2024 and sell it today you would lose (11,397) from holding Kyung Chang Industrial or give up 5.38% of portfolio value over 90 days.

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

Songwon Industrial Co  vs.  Kyung Chang Industrial

Songwon Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Songwon Industrial Co 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.

Kyung Chang Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kyung Chang 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 Songwon Industrial and Kyung Chang

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

The idea behind Songwon Industrial Co and Kyung Chang 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 Commodity Directory module to find actively traded commodities issued by global exchanges.