Correlation Between BH and Sangshin Electronics

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

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

Diversification Opportunities for BH and Sangshin Electronics

0.03

Correlation Coefficient

BH  Sangshin Electronics

Significant diversification

The 3 months correlation between BH and Sangshin is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BH Co and Sangshin Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sangshin Electronics and BH 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 BH Co are associated (or correlated) with Sangshin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sangshin Electronics has no effect on the direction of BH i.e., BH and Sangshin Electronics go up and down completely randomly.

Pair Corralation between BH and Sangshin Electronics

Assuming the 90 days trading horizon BH Co is expected to generate 1.71 times more return on investment than Sangshin Electronics. However, BH is 1.71 times more volatile than Sangshin Electronics Co. It trades about -0.04 of its potential returns per unit of risk. Sangshin Electronics Co is currently generating about -0.09 per unit of risk. If you would invest  2,302,057  in BH Co on October 13, 2024 and sell it today you would lose (578,057) from holding BH Co or give up 25.11% of portfolio value over 90 days.

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

BH Co  vs.  Sangshin Electronics Co

BH Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BH Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BH is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sangshin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sangshin Electronics 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BH and Sangshin Electronics

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

The idea behind BH Co and Sangshin Electronics 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.