Correlation Between Gyeongnam Steel and Soulbrain Holdings

Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and Soulbrain Holdings 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 Gyeongnam Steel and Soulbrain Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gyeongnam Steel Co and Soulbrain Holdings Co, you can compare the effects of market volatilities on Gyeongnam Steel and Soulbrain Holdings 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 Gyeongnam Steel with a short position of Soulbrain Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Soulbrain Holdings.

Diversification Opportunities for Gyeongnam Steel and Soulbrain Holdings

-0.48

Correlation Coefficient

Gyeongnam Steel  Soulbrain Holdings

Very good diversification

The 3 months correlation between Gyeongnam and Soulbrain is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Soulbrain Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soulbrain Holdings and Gyeongnam Steel 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 Gyeongnam Steel Co are associated (or correlated) with Soulbrain Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soulbrain Holdings has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Soulbrain Holdings go up and down completely randomly.

Pair Corralation between Gyeongnam Steel and Soulbrain Holdings

Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 1.75 times more return on investment than Soulbrain Holdings. However, Gyeongnam Steel is 1.75 times more volatile than Soulbrain Holdings Co. It trades about 0.16 of its potential returns per unit of risk. Soulbrain Holdings Co is currently generating about -0.21 per unit of risk. If you would invest  281,760  in Gyeongnam Steel Co on October 2, 2024 and sell it today you would earn a total of  172,740  from holding Gyeongnam Steel Co or generate 61.31% return on investment over 90 days.

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

Gyeongnam Steel Co  vs.  Soulbrain Holdings Co

Gyeongnam Steel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gyeongnam Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Soulbrain Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soulbrain Holdings Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gyeongnam Steel and Soulbrain Holdings

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

The idea behind Gyeongnam Steel Co and Soulbrain Holdings Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.