Correlation Between SBI Investment and Korea Shipbuilding

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

By analyzing existing cross correlation between SBI Investment KOREA and Korea Shipbuilding Offshore, you can compare the effects of market volatilities on SBI Investment and Korea Shipbuilding 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 SBI Investment with a short position of Korea Shipbuilding. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Investment and Korea Shipbuilding.

Diversification Opportunities for SBI Investment and Korea Shipbuilding

0.4

Correlation Coefficient

SBI Investment  Korea Shipbuilding

Very weak diversification

The 3 months correlation between SBI and Korea is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Korea Shipbuilding Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Shipbuilding and SBI Investment 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 SBI Investment KOREA are associated (or correlated) with Korea Shipbuilding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Shipbuilding has no effect on the direction of SBI Investment i.e., SBI Investment and Korea Shipbuilding go up and down completely randomly.

Pair Corralation between SBI Investment and Korea Shipbuilding

Assuming the 90 days trading horizon SBI Investment KOREA is expected to generate 1.82 times more return on investment than Korea Shipbuilding. However, SBI Investment is 1.82 times more volatile than Korea Shipbuilding Offshore. It trades about 0.13 of its potential returns per unit of risk. Korea Shipbuilding Offshore is currently generating about 0.12 per unit of risk. If you would invest  68,400  in SBI Investment KOREA on September 22, 2024 and sell it today you would earn a total of  9,500  from holding SBI Investment KOREA or generate 13.89% return on investment over 90 days.

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

SBI Investment KOREA  vs.  Korea Shipbuilding Offshore

SBI Investment KOREA

Risk-Adjusted Performance

2 of 100

Weak

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

Korea Shipbuilding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Shipbuilding Offshore are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Shipbuilding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SBI Investment and Korea Shipbuilding

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

The idea behind SBI Investment KOREA and Korea Shipbuilding Offshore 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.