Correlation Between Shinsegae Information and DSC Investment

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

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

Diversification Opportunities for Shinsegae Information and DSC Investment

0.24

Correlation Coefficient

Shinsegae Information  DSC Investment

Modest diversification

The 3 months correlation between Shinsegae and DSC is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Information Communic and DSC Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DSC Investment and Shinsegae 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 Shinsegae Information Communication are associated (or correlated) with DSC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DSC Investment has no effect on the direction of Shinsegae Information i.e., Shinsegae Information and DSC Investment go up and down completely randomly.

Pair Corralation between Shinsegae Information and DSC Investment

Assuming the 90 days trading horizon Shinsegae Information Communication is expected to under-perform the DSC Investment. But the stock apears to be less risky and, when comparing its historical volatility, Shinsegae Information Communication is 1.55 times less risky than DSC Investment. The stock trades about -0.07 of its potential returns per unit of risk. The DSC Investment is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  272,500  in DSC Investment on September 19, 2024 and sell it today you would earn a total of  25,000  from holding DSC Investment or generate 9.17% return on investment over 90 days.

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

Shinsegae Information Communic  vs.  DSC Investment

Shinsegae Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

DSC Investment

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Shinsegae Information and DSC Investment

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

The idea behind Shinsegae Information Communication and DSC Investment 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.

Check out your portfolio center.

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.