Correlation Between ENERGYMACHINERY KOREA and GS Engineering

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

By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and GS Engineering Construction, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA and GS Engineering 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 ENERGYMACHINERY KOREA with a short position of GS Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and GS Engineering.

Diversification Opportunities for ENERGYMACHINERY KOREA and GS Engineering

-0.51

Correlation Coefficient

ENERGYMACHINERY KOREA  GS Engineering

Excellent diversification

The 3 months correlation between ENERGYMACHINERY and 006360 is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and GS Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Engineering Const and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with GS Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Engineering Const has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and GS Engineering go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and GS Engineering

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 0.98 times more return on investment than GS Engineering. However, ENERGYMACHINERY KOREA CoLtd is 1.02 times less risky than GS Engineering. It trades about 0.15 of its potential returns per unit of risk. GS Engineering Construction is currently generating about -0.04 per unit of risk. If you would invest  170,000  in ENERGYMACHINERY KOREA CoLtd on December 4, 2024 and sell it today you would earn a total of  36,500  from holding ENERGYMACHINERY KOREA CoLtd or generate 21.47% return on investment over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  GS Engineering Construction

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

Good

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

GS Engineering Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days GS Engineering Construction 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 ENERGYMACHINERY KOREA and GS Engineering

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

The idea behind ENERGYMACHINERY KOREA CoLtd and GS Engineering Construction 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.