Correlation Between SBI Investment and Hanjoo Light

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

Diversification Opportunities for SBI Investment and Hanjoo Light

-0.71

Correlation Coefficient

SBI Investment  Hanjoo Light

Pay attention - limited upside

The 3 months correlation between SBI and Hanjoo is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Hanjoo Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjoo Light Metal 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 Hanjoo Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjoo Light Metal has no effect on the direction of SBI Investment i.e., SBI Investment and Hanjoo Light go up and down completely randomly.

Pair Corralation between SBI Investment and Hanjoo Light

Assuming the 90 days trading horizon SBI Investment KOREA is expected to generate 0.59 times more return on investment than Hanjoo Light. However, SBI Investment KOREA is 1.7 times less risky than Hanjoo Light. It trades about -0.02 of its potential returns per unit of risk. Hanjoo Light Metal is currently generating about -0.06 per unit of risk. If you would invest  121,000  in SBI Investment KOREA on October 11, 2024 and sell it today you would lose (41,000) from holding SBI Investment KOREA or give up 33.88% of portfolio value over 90 days.

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

SBI Investment KOREA  vs.  Hanjoo Light Metal

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.

Hanjoo Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanjoo Light Metal 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with SBI Investment and Hanjoo Light

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

The idea behind SBI Investment KOREA and Hanjoo Light Metal 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.