Correlation Between SBI Investment and Lion Chemtech

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

Diversification Opportunities for SBI Investment and Lion Chemtech

0.27

Correlation Coefficient

SBI Investment  Lion Chemtech

Modest diversification

The 3 months correlation between SBI and Lion is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Lion Chemtech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Chemtech 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 Lion Chemtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Chemtech has no effect on the direction of SBI Investment i.e., SBI Investment and Lion Chemtech go up and down completely randomly.

Pair Corralation between SBI Investment and Lion Chemtech

Assuming the 90 days trading horizon SBI Investment KOREA is expected to under-perform the Lion Chemtech. But the stock apears to be less risky and, when comparing its historical volatility, SBI Investment KOREA is 1.32 times less risky than Lion Chemtech. The stock trades about -0.02 of its potential returns per unit of risk. The Lion Chemtech Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  336,911  in Lion Chemtech Co on October 11, 2024 and sell it today you would lose (90,911) from holding Lion Chemtech Co or give up 26.98% of portfolio value over 90 days.

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

SBI Investment KOREA  vs.  Lion Chemtech Co

SBI Investment KOREA

Risk-Adjusted Performance

5 of 100

OK

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.

Lion Chemtech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lion Chemtech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Investment and Lion Chemtech

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

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