Correlation Between SBI Investment and Taegu Broadcasting

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

Diversification Opportunities for SBI Investment and Taegu Broadcasting

0.8

Correlation Coefficient

SBI Investment  Taegu Broadcasting

Very poor diversification

The 3 months correlation between SBI and Taegu is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Taegu Broadcasting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taegu Broadcasting 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 Taegu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taegu Broadcasting has no effect on the direction of SBI Investment i.e., SBI Investment and Taegu Broadcasting go up and down completely randomly.

Pair Corralation between SBI Investment and Taegu Broadcasting

Assuming the 90 days trading horizon SBI Investment KOREA is expected to under-perform the Taegu Broadcasting. But the stock apears to be less risky and, when comparing its historical volatility, SBI Investment KOREA is 1.08 times less risky than Taegu Broadcasting. The stock trades about -0.11 of its potential returns per unit of risk. The Taegu Broadcasting is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  81,674  in Taegu Broadcasting on December 24, 2024 and sell it today you would lose (4,274) from holding Taegu Broadcasting or give up 5.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

SBI Investment KOREA  vs.  Taegu Broadcasting

SBI Investment KOREA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SBI Investment KOREA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Taegu Broadcasting

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SBI Investment and Taegu Broadcasting

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

The idea behind SBI Investment KOREA and Taegu Broadcasting 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.