Correlation Between Korea Steel and Shinil Electronics

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

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

Diversification Opportunities for Korea Steel and Shinil Electronics

0.41

Correlation Coefficient

Korea Steel  Shinil Electronics

Very weak diversification

The 3 months correlation between Korea and Shinil is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Korea Steel Co and Shinil Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinil Electronics and Korea Steel 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 Korea Steel Co are associated (or correlated) with Shinil Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinil Electronics has no effect on the direction of Korea Steel i.e., Korea Steel and Shinil Electronics go up and down completely randomly.

Pair Corralation between Korea Steel and Shinil Electronics

Assuming the 90 days trading horizon Korea Steel Co is expected to generate 1.97 times more return on investment than Shinil Electronics. However, Korea Steel is 1.97 times more volatile than Shinil Electronics Co. It trades about 0.08 of its potential returns per unit of risk. Shinil Electronics Co is currently generating about 0.07 per unit of risk. If you would invest  160,000  in Korea Steel Co on December 23, 2024 and sell it today you would earn a total of  13,300  from holding Korea Steel Co or generate 8.31% return on investment over 90 days.

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

Korea Steel Co  vs.  Shinil Electronics Co

Korea Steel

Risk-Adjusted Performance

Modest

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

Shinil Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shinil Electronics Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shinil Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Korea Steel and Shinil Electronics

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

The idea behind Korea Steel Co and Shinil Electronics Co 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.