Correlation Between Shinsegae Food and SH Energy

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

By analyzing existing cross correlation between Shinsegae Food and SH Energy Chemical, you can compare the effects of market volatilities on Shinsegae Food and SH Energy 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 Shinsegae Food with a short position of SH Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinsegae Food and SH Energy.

Diversification Opportunities for Shinsegae Food and SH Energy

0.21

Correlation Coefficient

Shinsegae Food  SH Energy

Modest diversification

The 3 months correlation between Shinsegae and 002360 is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Food and SH Energy Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SH Energy Chemical and Shinsegae Food 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 Shinsegae Food are associated (or correlated) with SH Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SH Energy Chemical has no effect on the direction of Shinsegae Food i.e., Shinsegae Food and SH Energy go up and down completely randomly.

Pair Corralation between Shinsegae Food and SH Energy

Assuming the 90 days trading horizon Shinsegae Food is expected to generate 1.4 times more return on investment than SH Energy. However, Shinsegae Food is 1.4 times more volatile than SH Energy Chemical. It trades about 0.16 of its potential returns per unit of risk. SH Energy Chemical is currently generating about -0.07 per unit of risk. If you would invest  3,315,000  in Shinsegae Food on September 28, 2024 and sell it today you would earn a total of  590,000  from holding Shinsegae Food or generate 17.8% return on investment over 90 days.

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

Shinsegae Food  vs.  SH Energy Chemical

Shinsegae Food

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsegae Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinsegae Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SH Energy Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shinsegae Food and SH Energy

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

The idea behind Shinsegae Food and SH Energy Chemical 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.