Correlation Between Gyeongnam Steel and SGA Solutions

Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel and SGA Solutions 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 SGA Solutions 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 SGA Solutions CoLtd, you can compare the effects of market volatilities on Gyeongnam Steel and SGA Solutions 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 SGA Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and SGA Solutions.

Diversification Opportunities for Gyeongnam Steel and SGA Solutions

-0.83

Correlation Coefficient

Gyeongnam Steel  SGA Solutions

Pay attention - limited upside

The 3 months correlation between Gyeongnam and SGA is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and SGA Solutions CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGA Solutions CoLtd 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 SGA Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGA Solutions CoLtd has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and SGA Solutions go up and down completely randomly.

Pair Corralation between Gyeongnam Steel and SGA Solutions

Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 3.01 times more return on investment than SGA Solutions. However, Gyeongnam Steel is 3.01 times more volatile than SGA Solutions CoLtd. It trades about 0.28 of its potential returns per unit of risk. SGA Solutions CoLtd is currently generating about -0.04 per unit of risk. If you would invest  296,500  in Gyeongnam Steel Co on September 28, 2024 and sell it today you would earn a total of  182,500  from holding Gyeongnam Steel Co or generate 61.55% return on investment over 90 days.

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

Gyeongnam Steel Co  vs.  SGA Solutions CoLtd

Gyeongnam Steel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 13 (%) 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.

SGA Solutions CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGA Solutions CoLtd 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 Gyeongnam Steel and SGA Solutions

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

The idea behind Gyeongnam Steel Co and SGA Solutions 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.