Correlation Between Total Soft and Korea Shipbuilding

Can any of the company-specific risk be diversified away by investing in both Total Soft and Korea Shipbuilding 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 Total Soft and Korea Shipbuilding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Total Soft Bank and Korea Shipbuilding Offshore, you can compare the effects of market volatilities on Total Soft and Korea Shipbuilding 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 Total Soft with a short position of Korea Shipbuilding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Soft and Korea Shipbuilding.

Diversification Opportunities for Total Soft and Korea Shipbuilding

0.25

Correlation Coefficient

Total Soft  Korea Shipbuilding

Modest diversification

The 3 months correlation between Total and Korea is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and Korea Shipbuilding Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Shipbuilding and Total Soft 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 Total Soft Bank are associated (or correlated) with Korea Shipbuilding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Shipbuilding has no effect on the direction of Total Soft i.e., Total Soft and Korea Shipbuilding go up and down completely randomly.

Pair Corralation between Total Soft and Korea Shipbuilding

Assuming the 90 days trading horizon Total Soft Bank is expected to generate 2.82 times more return on investment than Korea Shipbuilding. However, Total Soft is 2.82 times more volatile than Korea Shipbuilding Offshore. It trades about 0.15 of its potential returns per unit of risk. Korea Shipbuilding Offshore is currently generating about 0.06 per unit of risk. If you would invest  468,000  in Total Soft Bank on November 29, 2024 and sell it today you would earn a total of  335,000  from holding Total Soft Bank or generate 71.58% return on investment over 90 days.

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

Total Soft Bank  vs.  Korea Shipbuilding Offshore

Total Soft Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft sustained solid returns over the last few months and may actually be approaching a breakup point.

Korea Shipbuilding

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Total Soft and Korea Shipbuilding

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

The idea behind Total Soft Bank and Korea Shipbuilding Offshore 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.