Correlation Between Sungdo Engineering and Narae Nanotech

Can any of the company-specific risk be diversified away by investing in both Sungdo Engineering and Narae Nanotech 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 Narae Nanotech 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 Narae Nanotech Corp, you can compare the effects of market volatilities on Sungdo Engineering and Narae Nanotech 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 Narae Nanotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sungdo Engineering and Narae Nanotech.

Diversification Opportunities for Sungdo Engineering and Narae Nanotech

0.82

Correlation Coefficient

Sungdo Engineering  Narae Nanotech

Very poor diversification

The 3 months correlation between Sungdo and Narae is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sungdo Engineering Constructio and Narae Nanotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Narae Nanotech Corp 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 Narae Nanotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Narae Nanotech Corp has no effect on the direction of Sungdo Engineering i.e., Sungdo Engineering and Narae Nanotech go up and down completely randomly.

Pair Corralation between Sungdo Engineering and Narae Nanotech

Assuming the 90 days trading horizon Sungdo Engineering is expected to generate 4.51 times less return on investment than Narae Nanotech. But when comparing it to its historical volatility, Sungdo Engineering Construction is 1.27 times less risky than Narae Nanotech. It trades about 0.16 of its potential returns per unit of risk. Narae Nanotech Corp is currently generating about 0.58 of returns per unit of risk over similar time horizon. If you would invest  282,000  in Narae Nanotech Corp on September 22, 2024 and sell it today you would earn a total of  135,500  from holding Narae Nanotech Corp or generate 48.05% return on investment over 90 days.

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

Sungdo Engineering Constructio  vs.  Narae Nanotech Corp

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.

Narae Nanotech Corp

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Sungdo Engineering and Narae Nanotech

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

The idea behind Sungdo Engineering Construction and Narae Nanotech Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.