Correlation Between GS Engineering and SBI Investment

Can any of the company-specific risk be diversified away by investing in both GS Engineering and SBI Investment 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 GS Engineering and SBI Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GS Engineering Construction and SBI Investment KOREA, you can compare the effects of market volatilities on GS Engineering and SBI Investment 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 GS Engineering with a short position of SBI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GS Engineering and SBI Investment.

Diversification Opportunities for GS Engineering and SBI Investment

0.18

Correlation Coefficient

GS Engineering  SBI Investment

Average diversification

The 3 months correlation between 006360 and SBI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding GS Engineering Construction and SBI Investment KOREA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Investment KOREA and GS Engineering 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 GS Engineering Construction are associated (or correlated) with SBI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Investment KOREA has no effect on the direction of GS Engineering i.e., GS Engineering and SBI Investment go up and down completely randomly.

Pair Corralation between GS Engineering and SBI Investment

Assuming the 90 days trading horizon GS Engineering Construction is expected to under-perform the SBI Investment. But the stock apears to be less risky and, when comparing its historical volatility, GS Engineering Construction is 1.63 times less risky than SBI Investment. The stock trades about -0.02 of its potential returns per unit of risk. The SBI Investment KOREA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  70,100  in SBI Investment KOREA on October 8, 2024 and sell it today you would earn a total of  11,200  from holding SBI Investment KOREA or generate 15.98% return on investment over 90 days.

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

GS Engineering Construction  vs.  SBI Investment KOREA

GS Engineering Const

Risk-Adjusted Performance

0 of 100

Weak

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

SBI Investment KOREA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GS Engineering and SBI Investment

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

The idea behind GS Engineering Construction and SBI Investment KOREA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .