Correlation Between Sungdo Engineering and Homecast CoLtd

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

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

Diversification Opportunities for Sungdo Engineering and Homecast CoLtd

0.38

Correlation Coefficient

Sungdo Engineering  Homecast CoLtd

Weak diversification

The 3 months correlation between Sungdo and Homecast is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Sungdo Engineering Constructio and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and Sungdo 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 Sungdo Engineering Construction are associated (or correlated) with Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Sungdo Engineering i.e., Sungdo Engineering and Homecast CoLtd go up and down completely randomly.

Pair Corralation between Sungdo Engineering and Homecast CoLtd

Assuming the 90 days trading horizon Sungdo Engineering Construction is expected to generate 0.88 times more return on investment than Homecast CoLtd. However, Sungdo Engineering Construction is 1.14 times less risky than Homecast CoLtd. It trades about -0.03 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.12 per unit of risk. If you would invest  517,000  in Sungdo Engineering Construction on October 8, 2024 and sell it today you would lose (32,000) from holding Sungdo Engineering Construction or give up 6.19% of portfolio value over 90 days.

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

Sungdo Engineering Constructio  vs.  Homecast CoLtd

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.

Homecast CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homecast CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sungdo Engineering and Homecast CoLtd

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

The idea behind Sungdo Engineering Construction and Homecast 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.