Correlation Between SBI Investment and Daechang Steel

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

Diversification Opportunities for SBI Investment and Daechang Steel

-0.54

Correlation Coefficient

SBI Investment  Daechang Steel

Excellent diversification

The 3 months correlation between SBI and Daechang is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Daechang Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daechang Steel 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 Daechang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daechang Steel has no effect on the direction of SBI Investment i.e., SBI Investment and Daechang Steel go up and down completely randomly.

Pair Corralation between SBI Investment and Daechang Steel

Assuming the 90 days trading horizon SBI Investment KOREA is expected to generate 2.91 times more return on investment than Daechang Steel. However, SBI Investment is 2.91 times more volatile than Daechang Steel Co. It trades about 0.11 of its potential returns per unit of risk. Daechang Steel Co is currently generating about -0.2 per unit of risk. If you would invest  70,200  in SBI Investment KOREA on September 26, 2024 and sell it today you would earn a total of  7,300  from holding SBI Investment KOREA or generate 10.4% return on investment over 90 days.

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

SBI Investment KOREA  vs.  Daechang Steel Co

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.

Daechang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daechang Steel Co 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.

Pair Trading with SBI Investment and Daechang Steel

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

The idea behind SBI Investment KOREA and Daechang Steel 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.