Correlation Between Sungmoon Electronics and KTB Investment

Can any of the company-specific risk be diversified away by investing in both Sungmoon Electronics and KTB Investment 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 KTB Investment 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 KTB Investment Securities, you can compare the effects of market volatilities on Sungmoon Electronics and KTB Investment 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 KTB Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sungmoon Electronics and KTB Investment.

Diversification Opportunities for Sungmoon Electronics and KTB Investment

0.3

Correlation Coefficient

Sungmoon Electronics  KTB Investment

Weak diversification

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

Pair Corralation between Sungmoon Electronics and KTB Investment

Assuming the 90 days trading horizon Sungmoon Electronics is expected to generate 1.88 times less return on investment than KTB Investment. In addition to that, Sungmoon Electronics is 1.11 times more volatile than KTB Investment Securities. It trades about 0.15 of its total potential returns per unit of risk. KTB Investment Securities is currently generating about 0.31 per unit of volatility. If you would invest  240,000  in KTB Investment Securities on October 8, 2024 and sell it today you would earn a total of  69,000  from holding KTB Investment Securities or generate 28.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Sungmoon Electronics Co  vs.  KTB Investment Securities

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 somewhat strong basic indicators, Sungmoon Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KTB Investment Securities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KTB Investment Securities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KTB Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sungmoon Electronics and KTB Investment

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

The idea behind Sungmoon Electronics Co and KTB Investment Securities 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.