Correlation Between Sung Kwang and SFA Engineering

Can any of the company-specific risk be diversified away by investing in both Sung Kwang and SFA 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 Sung Kwang and SFA Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sung Kwang Bend and SFA Engineering, you can compare the effects of market volatilities on Sung Kwang and SFA 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 Sung Kwang with a short position of SFA Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sung Kwang and SFA Engineering.

Diversification Opportunities for Sung Kwang and SFA Engineering

-0.48

Correlation Coefficient

Sung Kwang  SFA Engineering

Very good diversification

The 3 months correlation between Sung and SFA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sung Kwang Bend and SFA Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFA Engineering and Sung Kwang 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 Sung Kwang Bend are associated (or correlated) with SFA Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFA Engineering has no effect on the direction of Sung Kwang i.e., Sung Kwang and SFA Engineering go up and down completely randomly.

Pair Corralation between Sung Kwang and SFA Engineering

Assuming the 90 days trading horizon Sung Kwang Bend is expected to generate 2.88 times more return on investment than SFA Engineering. However, Sung Kwang is 2.88 times more volatile than SFA Engineering. It trades about 0.4 of its potential returns per unit of risk. SFA Engineering is currently generating about -0.1 per unit of risk. If you would invest  2,370,000  in Sung Kwang Bend on October 27, 2024 and sell it today you would earn a total of  725,000  from holding Sung Kwang Bend or generate 30.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Sung Kwang Bend  vs.  SFA Engineering

Sung Kwang Bend

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sung Kwang Bend are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sung Kwang sustained solid returns over the last few months and may actually be approaching a breakup point.

SFA Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFA Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sung Kwang and SFA Engineering

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

The idea behind Sung Kwang Bend and SFA Engineering 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.