Correlation Between SBI Investment and Daol Investment

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

Diversification Opportunities for SBI Investment and Daol Investment

0.07

Correlation Coefficient

SBI Investment  Daol Investment

Significant diversification

The 3 months correlation between SBI and Daol is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Daol Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daol Investment Secu 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 Daol Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daol Investment Secu has no effect on the direction of SBI Investment i.e., SBI Investment and Daol Investment go up and down completely randomly.

Pair Corralation between SBI Investment and Daol Investment

Assuming the 90 days trading horizon SBI Investment is expected to generate 2.37 times less return on investment than Daol Investment. But when comparing it to its historical volatility, SBI Investment KOREA is 2.04 times less risky than Daol Investment. It trades about 0.22 of its potential returns per unit of risk. Daol Investment Securities is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  240,000  in Daol Investment Securities on October 10, 2024 and sell it today you would earn a total of  60,500  from holding Daol Investment Securities or generate 25.21% return on investment over 90 days.

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

SBI Investment KOREA  vs.  Daol Investment Securities

SBI Investment KOREA

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Daol Investment Secu

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with SBI Investment and Daol Investment

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

The idea behind SBI Investment KOREA and Daol 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.