Correlation Between Tae Kwang and Sung Kwang

Can any of the company-specific risk be diversified away by investing in both Tae Kwang and Sung Kwang 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 Tae Kwang and Sung Kwang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tae Kwang and Sung Kwang Bend, you can compare the effects of market volatilities on Tae Kwang and Sung Kwang 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 Tae Kwang with a short position of Sung Kwang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tae Kwang and Sung Kwang.

Diversification Opportunities for Tae Kwang and Sung Kwang

0.8

Correlation Coefficient

Tae Kwang  Sung Kwang

Very poor diversification

The 3 months correlation between Tae and Sung is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kwang and Sung Kwang Bend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sung Kwang Bend and Tae Kwang 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 Tae Kwang are associated (or correlated) with Sung Kwang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sung Kwang Bend has no effect on the direction of Tae Kwang i.e., Tae Kwang and Sung Kwang go up and down completely randomly.

Pair Corralation between Tae Kwang and Sung Kwang

Assuming the 90 days trading horizon Tae Kwang is expected to generate 0.96 times more return on investment than Sung Kwang. However, Tae Kwang is 1.04 times less risky than Sung Kwang. It trades about 0.13 of its potential returns per unit of risk. Sung Kwang Bend is currently generating about 0.06 per unit of risk. If you would invest  1,790,806  in Tae Kwang on December 22, 2024 and sell it today you would earn a total of  469,194  from holding Tae Kwang or generate 26.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.28%
Values	Daily Returns

Tae Kwang  vs.  Sung Kwang Bend

Tae Kwang

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kwang are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tae Kwang sustained solid returns over the last few months and may actually be approaching a breakup point.

Sung Kwang Bend

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sung Kwang Bend are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sung Kwang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tae Kwang and Sung Kwang

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

The idea behind Tae Kwang and Sung Kwang Bend 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.