Correlation Between Korean Drug and Ssangyong Information

Can any of the company-specific risk be diversified away by investing in both Korean Drug and Ssangyong Information 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 Korean Drug and Ssangyong Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korean Drug Co and Ssangyong Information Communication, you can compare the effects of market volatilities on Korean Drug and Ssangyong Information 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 Korean Drug with a short position of Ssangyong Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korean Drug and Ssangyong Information.

Diversification Opportunities for Korean Drug and Ssangyong Information

0.3

Correlation Coefficient

Korean Drug  Ssangyong Information

Weak diversification

The 3 months correlation between Korean and Ssangyong is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Korean Drug Co and Ssangyong Information Communic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ssangyong Information and Korean Drug 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 Korean Drug Co are associated (or correlated) with Ssangyong Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ssangyong Information has no effect on the direction of Korean Drug i.e., Korean Drug and Ssangyong Information go up and down completely randomly.

Pair Corralation between Korean Drug and Ssangyong Information

Assuming the 90 days trading horizon Korean Drug Co is expected to under-perform the Ssangyong Information. In addition to that, Korean Drug is 1.07 times more volatile than Ssangyong Information Communication. It trades about -0.04 of its total potential returns per unit of risk. Ssangyong Information Communication is currently generating about -0.03 per unit of volatility. If you would invest  91,700  in Ssangyong Information Communication on October 26, 2024 and sell it today you would lose (28,800) from holding Ssangyong Information Communication or give up 31.41% of portfolio value over 90 days.

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

Korean Drug Co  vs.  Ssangyong Information Communic

Korean Drug

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korean Drug Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korean Drug is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ssangyong Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ssangyong Information Communication are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ssangyong Information is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Korean Drug and Ssangyong Information

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

The idea behind Korean Drug Co and Ssangyong Information Communication 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.