Correlation Between Insung Information and Alton Sports

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

By analyzing existing cross correlation between Insung Information Co and Alton Sports CoLtd, you can compare the effects of market volatilities on Insung Information and Alton Sports 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 Insung Information with a short position of Alton Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insung Information and Alton Sports.

Diversification Opportunities for Insung Information and Alton Sports

0.83

Correlation Coefficient

Insung Information  Alton Sports

Very poor diversification

The 3 months correlation between Insung and Alton is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Insung Information Co and Alton Sports CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alton Sports CoLtd and Insung Information 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 Insung Information Co are associated (or correlated) with Alton Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alton Sports CoLtd has no effect on the direction of Insung Information i.e., Insung Information and Alton Sports go up and down completely randomly.

Pair Corralation between Insung Information and Alton Sports

Assuming the 90 days trading horizon Insung Information Co is expected to generate 1.66 times more return on investment than Alton Sports. However, Insung Information is 1.66 times more volatile than Alton Sports CoLtd. It trades about -0.01 of its potential returns per unit of risk. Alton Sports CoLtd is currently generating about -0.03 per unit of risk. If you would invest  205,000  in Insung Information Co on October 21, 2024 and sell it today you would lose (10,300) from holding Insung Information Co or give up 5.02% of portfolio value over 90 days.

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

Insung Information Co  vs.  Alton Sports CoLtd

Insung Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alton Sports CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Insung Information and Alton Sports

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

The idea behind Insung Information Co and Alton Sports CoLtd 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.