Correlation Between SBI Investment and Cloud Air

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

Diversification Opportunities for SBI Investment and Cloud Air

0.07

Correlation Coefficient

SBI Investment  Cloud Air

Significant diversification

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

Pair Corralation between SBI Investment and Cloud Air

Assuming the 90 days trading horizon SBI Investment is expected to generate 2.14 times less return on investment than Cloud Air. But when comparing it to its historical volatility, SBI Investment KOREA is 1.08 times less risky than Cloud Air. It trades about 0.14 of its potential returns per unit of risk. Cloud Air CoLtd is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  79,400  in Cloud Air CoLtd on October 11, 2024 and sell it today you would earn a total of  9,800  from holding Cloud Air CoLtd or generate 12.34% 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.  Cloud Air CoLtd

SBI Investment KOREA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 5 (%) 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.

Cloud Air CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cloud Air CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cloud Air 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 Cloud Air

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

The idea behind SBI Investment KOREA and Cloud Air CoLtd 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.