Correlation Between Ni Steel and SK Chemicals

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

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

Diversification Opportunities for Ni Steel and SK Chemicals

0.62

Correlation Coefficient

Ni Steel  SK Chemicals

Poor diversification

The 3 months correlation between 008260 and 285130 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ni Steel and SK Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Chemicals and Ni 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 Ni Steel are associated (or correlated) with SK Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Chemicals has no effect on the direction of Ni Steel i.e., Ni Steel and SK Chemicals go up and down completely randomly.

Pair Corralation between Ni Steel and SK Chemicals

Assuming the 90 days trading horizon Ni Steel is expected to generate 1.0 times more return on investment than SK Chemicals. However, Ni Steel is 1.0 times more volatile than SK Chemicals Co. It trades about -0.06 of its potential returns per unit of risk. SK Chemicals Co is currently generating about -0.07 per unit of risk. If you would invest  452,000  in Ni Steel on August 30, 2024 and sell it today you would lose (74,500) from holding Ni Steel or give up 16.48% of portfolio value over 90 days.

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

Ni Steel  vs.  SK Chemicals Co

Ni Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

SK Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Chemicals Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ni Steel and SK Chemicals

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

The idea behind Ni Steel and SK Chemicals 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.