Correlation Between Shinsegae Information and Coloray International

Can any of the company-specific risk be diversified away by investing in both Shinsegae Information and Coloray International 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 Coloray International 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 Coloray International Investment, you can compare the effects of market volatilities on Shinsegae Information and Coloray International 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 Coloray International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinsegae Information and Coloray International.

Diversification Opportunities for Shinsegae Information and Coloray International

0.8

Correlation Coefficient

Shinsegae Information  Coloray International

Very poor diversification

The 3 months correlation between Shinsegae and Coloray is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Information Communic and Coloray International Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloray International 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 Coloray International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloray International has no effect on the direction of Shinsegae Information i.e., Shinsegae Information and Coloray International go up and down completely randomly.

Pair Corralation between Shinsegae Information and Coloray International

Assuming the 90 days trading horizon Shinsegae Information Communication is expected to generate 0.7 times more return on investment than Coloray International. However, Shinsegae Information Communication is 1.42 times less risky than Coloray International. It trades about -0.07 of its potential returns per unit of risk. Coloray International Investment is currently generating about -0.1 per unit of risk. If you would invest  911,000  in Shinsegae Information Communication on September 19, 2024 and sell it today you would lose (27,000) from holding Shinsegae Information Communication or give up 2.96% of portfolio value over 90 days.

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

Shinsegae Information Communic  vs.  Coloray International Investme

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.

Coloray International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coloray International Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shinsegae Information and Coloray International

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

The idea behind Shinsegae Information Communication and Coloray International 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.