Correlation Between Sungmoon Electronics and Osang Healthcare

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

Diversification Opportunities for Sungmoon Electronics and Osang Healthcare

0.65

Correlation Coefficient

Sungmoon Electronics  Osang Healthcare

Poor diversification

The 3 months correlation between Sungmoon and Osang is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sungmoon Electronics Co and Osang Healthcare Co,Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osang Healthcare Co,Ltd 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 Osang Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osang Healthcare Co,Ltd has no effect on the direction of Sungmoon Electronics i.e., Sungmoon Electronics and Osang Healthcare go up and down completely randomly.

Pair Corralation between Sungmoon Electronics and Osang Healthcare

Assuming the 90 days trading horizon Sungmoon Electronics is expected to generate 2.64 times less return on investment than Osang Healthcare. But when comparing it to its historical volatility, Sungmoon Electronics Co is 1.23 times less risky than Osang Healthcare. It trades about 0.15 of its potential returns per unit of risk. Osang Healthcare Co,Ltd is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  989,000  in Osang Healthcare Co,Ltd on October 9, 2024 and sell it today you would earn a total of  418,000  from holding Osang Healthcare Co,Ltd or generate 42.26% return on investment over 90 days.

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

Sungmoon Electronics Co  vs.  Osang Healthcare Co,Ltd

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.

Osang Healthcare Co,Ltd

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Osang Healthcare Co,Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Osang Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sungmoon Electronics and Osang Healthcare

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

The idea behind Sungmoon Electronics Co and Osang Healthcare Co,Ltd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.