Correlation Between SBI Investment and EV Advanced

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

Diversification Opportunities for SBI Investment and EV Advanced

-0.33

Correlation Coefficient

SBI Investment  EV Advanced

Very good diversification

The 3 months correlation between SBI and 131400 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and EV Advanced Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EV Advanced Material 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 EV Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EV Advanced Material has no effect on the direction of SBI Investment i.e., SBI Investment and EV Advanced go up and down completely randomly.

Pair Corralation between SBI Investment and EV Advanced

Assuming the 90 days trading horizon SBI Investment KOREA is expected to under-perform the EV Advanced. But the stock apears to be less risky and, when comparing its historical volatility, SBI Investment KOREA is 2.5 times less risky than EV Advanced. The stock trades about -0.01 of its potential returns per unit of risk. The EV Advanced Material is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  154,510  in EV Advanced Material on September 26, 2024 and sell it today you would earn a total of  31,290  from holding EV Advanced Material or generate 20.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

SBI Investment KOREA  vs.  EV Advanced Material

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.

EV Advanced Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EV Advanced Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SBI Investment and EV Advanced

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

The idea behind SBI Investment KOREA and EV Advanced Material 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.