Correlation Between Kbi Metal and Sungwoo Electronics

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

By analyzing existing cross correlation between Kbi Metal Co and Sungwoo Electronics Co, you can compare the effects of market volatilities on Kbi Metal and Sungwoo Electronics 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 Kbi Metal with a short position of Sungwoo Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kbi Metal and Sungwoo Electronics.

Diversification Opportunities for Kbi Metal and Sungwoo Electronics

0.58

Correlation Coefficient

Kbi Metal  Sungwoo Electronics

Very weak diversification

The 3 months correlation between Kbi and Sungwoo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Kbi Metal Co and Sungwoo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungwoo Electronics and Kbi Metal 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 Kbi Metal Co are associated (or correlated) with Sungwoo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungwoo Electronics has no effect on the direction of Kbi Metal i.e., Kbi Metal and Sungwoo Electronics go up and down completely randomly.

Pair Corralation between Kbi Metal and Sungwoo Electronics

Assuming the 90 days trading horizon Kbi Metal Co is expected to under-perform the Sungwoo Electronics. In addition to that, Kbi Metal is 1.46 times more volatile than Sungwoo Electronics Co. It trades about -0.13 of its total potential returns per unit of risk. Sungwoo Electronics Co is currently generating about -0.03 per unit of volatility. If you would invest  371,500  in Sungwoo Electronics Co on September 12, 2024 and sell it today you would lose (30,500) from holding Sungwoo Electronics Co or give up 8.21% of portfolio value over 90 days.

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

Kbi Metal Co  vs.  Sungwoo Electronics Co

Kbi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kbi Metal Co 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.

Sungwoo Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungwoo Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sungwoo Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kbi Metal and Sungwoo Electronics

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

The idea behind Kbi Metal Co and Sungwoo Electronics 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.