Correlation Between Sungmoon Electronics and Korea Alcohol

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

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

Diversification Opportunities for Sungmoon Electronics and Korea Alcohol

0.79

Correlation Coefficient

Sungmoon Electronics  Korea Alcohol

Poor diversification

The 3 months correlation between Sungmoon and Korea is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sungmoon Electronics Co and Korea Alcohol Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Alcohol Industrial and Sungmoon Electronics 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 Sungmoon Electronics Co are associated (or correlated) with Korea Alcohol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Alcohol Industrial has no effect on the direction of Sungmoon Electronics i.e., Sungmoon Electronics and Korea Alcohol go up and down completely randomly.

Pair Corralation between Sungmoon Electronics and Korea Alcohol

Assuming the 90 days trading horizon Sungmoon Electronics Co is expected to generate 2.82 times more return on investment than Korea Alcohol. However, Sungmoon Electronics is 2.82 times more volatile than Korea Alcohol Industrial. It trades about -0.08 of its potential returns per unit of risk. Korea Alcohol Industrial is currently generating about -0.25 per unit of risk. If you would invest  487,000  in Sungmoon Electronics Co on September 12, 2024 and sell it today you would lose (95,000) from holding Sungmoon Electronics Co or give up 19.51% of portfolio value over 90 days.

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

Sungmoon Electronics Co  vs.  Korea Alcohol Industrial

Sungmoon Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungmoon Electronics 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Alcohol Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Alcohol Industrial 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sungmoon Electronics and Korea Alcohol

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

The idea behind Sungmoon Electronics Co and Korea Alcohol Industrial 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.