Correlation Between Korea Real and Sangsin Energy

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

By analyzing existing cross correlation between Korea Real Estate and Sangsin Energy Display, you can compare the effects of market volatilities on Korea Real and Sangsin 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 Korea Real with a short position of Sangsin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Real and Sangsin Energy.

Diversification Opportunities for Korea Real and Sangsin Energy

0.52

Correlation Coefficient

Korea Real  Sangsin Energy

Very weak diversification

The 3 months correlation between Korea and Sangsin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and Sangsin Energy Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sangsin Energy Display and Korea Real 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 Korea Real Estate are associated (or correlated) with Sangsin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sangsin Energy Display has no effect on the direction of Korea Real i.e., Korea Real and Sangsin Energy go up and down completely randomly.

Pair Corralation between Korea Real and Sangsin Energy

Assuming the 90 days trading horizon Korea Real is expected to generate 13.85 times less return on investment than Sangsin Energy. But when comparing it to its historical volatility, Korea Real Estate is 5.29 times less risky than Sangsin Energy. It trades about 0.03 of its potential returns per unit of risk. Sangsin Energy Display is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  738,000  in Sangsin Energy Display on December 26, 2024 and sell it today you would earn a total of  100,000  from holding Sangsin Energy Display or generate 13.55% return on investment over 90 days.

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

Korea Real Estate  vs.  Sangsin Energy Display

Korea Real Estate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Real Estate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sangsin Energy Display

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sangsin Energy Display are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sangsin Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korea Real and Sangsin Energy

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

The idea behind Korea Real Estate and Sangsin Energy Display 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 Global Correlations module to find global opportunities by holding instruments from different markets.