Correlation Between AfreecaTV and SBI Investment

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

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

Diversification Opportunities for AfreecaTV and SBI Investment

-0.11

Correlation Coefficient

AfreecaTV  SBI Investment

Good diversification

The 3 months correlation between AfreecaTV and SBI is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding AfreecaTV Co and SBI Investment KOREA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Investment KOREA and AfreecaTV 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 AfreecaTV Co are associated (or correlated) with SBI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Investment KOREA has no effect on the direction of AfreecaTV i.e., AfreecaTV and SBI Investment go up and down completely randomly.

Pair Corralation between AfreecaTV and SBI Investment

Assuming the 90 days trading horizon AfreecaTV Co is expected to generate 2.83 times more return on investment than SBI Investment. However, AfreecaTV is 2.83 times more volatile than SBI Investment KOREA. It trades about -0.01 of its potential returns per unit of risk. SBI Investment KOREA is currently generating about -0.1 per unit of risk. If you would invest  9,165,000  in AfreecaTV Co on December 25, 2024 and sell it today you would lose (765,000) from holding AfreecaTV Co or give up 8.35% of portfolio value over 90 days.

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

AfreecaTV Co  vs.  SBI Investment KOREA

AfreecaTV

Risk-Adjusted Performance

Very Weak

Over the last 90 days AfreecaTV Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AfreecaTV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SBI Investment KOREA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SBI Investment KOREA 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 AfreecaTV and SBI Investment

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

The idea behind AfreecaTV Co and SBI Investment KOREA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.