Correlation Between Korea Alcohol and Sungmoon Electronics

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

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

Diversification Opportunities for Korea Alcohol and Sungmoon Electronics

0.57

Correlation Coefficient

Korea Alcohol  Sungmoon Electronics

Very weak diversification

The 3 months correlation between Korea and Sungmoon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Korea Alcohol Industrial and Sungmoon Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungmoon Electronics and Korea Alcohol 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 Korea Alcohol Industrial are associated (or correlated) with Sungmoon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungmoon Electronics has no effect on the direction of Korea Alcohol i.e., Korea Alcohol and Sungmoon Electronics go up and down completely randomly.

Pair Corralation between Korea Alcohol and Sungmoon Electronics

Assuming the 90 days trading horizon Korea Alcohol is expected to generate 3.17 times less return on investment than Sungmoon Electronics. But when comparing it to its historical volatility, Korea Alcohol Industrial is 2.99 times less risky than Sungmoon Electronics. It trades about 0.06 of its potential returns per unit of risk. Sungmoon Electronics Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  443,500  in Sungmoon Electronics Co on December 2, 2024 and sell it today you would earn a total of  47,500  from holding Sungmoon Electronics Co or generate 10.71% return on investment over 90 days.

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

Korea Alcohol Industrial  vs.  Sungmoon Electronics Co

Korea Alcohol Industrial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Alcohol Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Alcohol is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sungmoon Electronics

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Korea Alcohol and Sungmoon Electronics

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

The idea behind Korea Alcohol Industrial and Sungmoon Electronics Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.