Correlation Between Sungmoon Electronics and KG Eco

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

Diversification Opportunities for Sungmoon Electronics and KG Eco

0.35

Correlation Coefficient

Sungmoon Electronics  KG Eco

Weak diversification

The 3 months correlation between Sungmoon and 151860 is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sungmoon Electronics Co and KG Eco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KG Eco Technology 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 KG Eco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KG Eco Technology has no effect on the direction of Sungmoon Electronics i.e., Sungmoon Electronics and KG Eco go up and down completely randomly.

Pair Corralation between Sungmoon Electronics and KG Eco

Assuming the 90 days trading horizon Sungmoon Electronics Co is expected to under-perform the KG Eco. In addition to that, Sungmoon Electronics is 1.34 times more volatile than KG Eco Technology. It trades about -0.05 of its total potential returns per unit of risk. KG Eco Technology is currently generating about 0.0 per unit of volatility. If you would invest  519,011  in KG Eco Technology on October 27, 2024 and sell it today you would lose (19,011) from holding KG Eco Technology or give up 3.66% of portfolio value over 90 days.

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

Sungmoon Electronics Co  vs.  KG Eco Technology

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KG Eco Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KG Eco Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KG Eco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sungmoon Electronics and KG Eco

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

The idea behind Sungmoon Electronics Co and KG Eco Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.