Correlation Between ENERGYMACHINERY KOREA and SV Investment

Can any of the company-specific risk be diversified away by investing in both ENERGYMACHINERY KOREA and SV 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 ENERGYMACHINERY KOREA and SV Investment 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 SV Investment, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA and SV 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 ENERGYMACHINERY KOREA with a short position of SV Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and SV Investment.

Diversification Opportunities for ENERGYMACHINERY KOREA and SV Investment

0.68

Correlation Coefficient

ENERGYMACHINERY KOREA  SV Investment

Poor diversification

The 3 months correlation between ENERGYMACHINERY and 289080 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and SV Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SV Investment 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 SV Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SV Investment has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and SV Investment go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and SV Investment

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to generate 1.04 times more return on investment than SV Investment. However, ENERGYMACHINERY KOREA is 1.04 times more volatile than SV Investment. It trades about -0.01 of its potential returns per unit of risk. SV Investment is currently generating about -0.02 per unit of risk. If you would invest  307,000  in ENERGYMACHINERY KOREA CoLtd on September 28, 2024 and sell it today you would lose (82,000) from holding ENERGYMACHINERY KOREA CoLtd or give up 26.71% of portfolio value over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  SV Investment

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENERGYMACHINERY KOREA CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ENERGYMACHINERY KOREA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SV Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ENERGYMACHINERY KOREA and SV Investment

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

The idea behind ENERGYMACHINERY KOREA CoLtd and SV Investment 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.