Correlation Between Kumho Petro and Sungwoo Hitech

Can any of the company-specific risk be diversified away by investing in both Kumho Petro and Sungwoo Hitech 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 Kumho Petro and Sungwoo Hitech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kumho Petro Chemical and Sungwoo Hitech Co, you can compare the effects of market volatilities on Kumho Petro and Sungwoo Hitech 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 Kumho Petro with a short position of Sungwoo Hitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumho Petro and Sungwoo Hitech.

Diversification Opportunities for Kumho Petro and Sungwoo Hitech

0.51

Correlation Coefficient

Kumho Petro  Sungwoo Hitech

Very weak diversification

The 3 months correlation between Kumho and Sungwoo is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Kumho Petro Chemical and Sungwoo Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungwoo Hitech and Kumho Petro 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 Kumho Petro Chemical are associated (or correlated) with Sungwoo Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungwoo Hitech has no effect on the direction of Kumho Petro i.e., Kumho Petro and Sungwoo Hitech go up and down completely randomly.

Pair Corralation between Kumho Petro and Sungwoo Hitech

Assuming the 90 days trading horizon Kumho Petro is expected to generate 1.55 times less return on investment than Sungwoo Hitech. But when comparing it to its historical volatility, Kumho Petro Chemical is 1.19 times less risky than Sungwoo Hitech. It trades about 0.1 of its potential returns per unit of risk. Sungwoo Hitech Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  498,000  in Sungwoo Hitech Co on December 25, 2024 and sell it today you would earn a total of  91,000  from holding Sungwoo Hitech Co or generate 18.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

Kumho Petro Chemical  vs.  Sungwoo Hitech Co

Kumho Petro Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kumho Petro Chemical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kumho Petro sustained solid returns over the last few months and may actually be approaching a breakup point.

Sungwoo Hitech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sungwoo Hitech Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sungwoo Hitech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kumho Petro and Sungwoo Hitech

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

The idea behind Kumho Petro Chemical and Sungwoo Hitech 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.