Correlation Between Shinsegae Engineering and Sungdo Engineering

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

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

Diversification Opportunities for Shinsegae Engineering and Sungdo Engineering

0.54

Correlation Coefficient

Shinsegae Engineering  Sungdo Engineering

Very weak diversification

The 3 months correlation between Shinsegae and Sungdo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Engineering Construc and Sungdo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungdo Engineering and Shinsegae Engineering 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 Engineering Construction are associated (or correlated) with Sungdo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungdo Engineering has no effect on the direction of Shinsegae Engineering i.e., Shinsegae Engineering and Sungdo Engineering go up and down completely randomly.

Pair Corralation between Shinsegae Engineering and Sungdo Engineering

Assuming the 90 days trading horizon Shinsegae Engineering Construction is expected to generate 1.07 times more return on investment than Sungdo Engineering. However, Shinsegae Engineering is 1.07 times more volatile than Sungdo Engineering Construction. It trades about 0.02 of its potential returns per unit of risk. Sungdo Engineering Construction is currently generating about 0.01 per unit of risk. If you would invest  1,670,008  in Shinsegae Engineering Construction on October 22, 2024 and sell it today you would earn a total of  144,992  from holding Shinsegae Engineering Construction or generate 8.68% return on investment over 90 days.

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

Shinsegae Engineering Construc  vs.  Sungdo Engineering Constructio

Shinsegae Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sungdo Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungdo Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sungdo Engineering 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 Engineering and Sungdo Engineering

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

The idea behind Shinsegae Engineering Construction and Sungdo Engineering Construction 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.