Correlation Between SBI Investment and Formetal

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

Diversification Opportunities for SBI Investment and Formetal

-0.29

Correlation Coefficient

SBI Investment  Formetal

Very good diversification

The 3 months correlation between SBI and Formetal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Formetal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formetal 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 Formetal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formetal has no effect on the direction of SBI Investment i.e., SBI Investment and Formetal go up and down completely randomly.

Pair Corralation between SBI Investment and Formetal

Assuming the 90 days trading horizon SBI Investment KOREA is expected to under-perform the Formetal. But the stock apears to be less risky and, when comparing its historical volatility, SBI Investment KOREA is 2.38 times less risky than Formetal. The stock trades about -0.1 of its potential returns per unit of risk. The Formetal Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  296,000  in Formetal Co on December 25, 2024 and sell it today you would earn a total of  30,500  from holding Formetal Co or generate 10.3% return on investment over 90 days.

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

SBI Investment KOREA  vs.  Formetal Co

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.

Formetal

Risk-Adjusted Performance

Insignificant

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

Pair Trading with SBI Investment and Formetal

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

The idea behind SBI Investment KOREA and Formetal 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.