Correlation Between GS Engineering and Sungdo Engineering

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

Diversification Opportunities for GS Engineering and Sungdo Engineering

0.05

Correlation Coefficient

GS Engineering  Sungdo Engineering

Significant diversification

The 3 months correlation between 006360 and Sungdo is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding GS Engineering Construction and Sungdo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungdo Engineering 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 Sungdo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungdo Engineering has no effect on the direction of GS Engineering i.e., GS Engineering and Sungdo Engineering go up and down completely randomly.

Pair Corralation between GS Engineering and Sungdo Engineering

Assuming the 90 days trading horizon GS Engineering Construction is expected to under-perform the Sungdo Engineering. In addition to that, GS Engineering is 1.22 times more volatile than Sungdo Engineering Construction. It trades about -0.04 of its total potential returns per unit of risk. Sungdo Engineering Construction is currently generating about 0.16 per unit of volatility. If you would invest  436,500  in Sungdo Engineering Construction on September 22, 2024 and sell it today you would earn a total of  38,000  from holding Sungdo Engineering Construction or generate 8.71% 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.  Sungdo Engineering Constructio

GS Engineering Const

Risk-Adjusted Performance

0 of 100

Very 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.

Sungdo Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GS Engineering and Sungdo Engineering

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

The idea behind GS Engineering Construction and Sungdo Engineering Construction 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.