Correlation Between Grand Korea and Sung Bo

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

By analyzing existing cross correlation between Grand Korea Leisure and Sung Bo Chemicals, you can compare the effects of market volatilities on Grand Korea and Sung Bo 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 Grand Korea with a short position of Sung Bo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Korea and Sung Bo.

Diversification Opportunities for Grand Korea and Sung Bo

0.28

Correlation Coefficient

Grand Korea  Sung Bo

Modest diversification

The 3 months correlation between Grand and Sung is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Grand Korea Leisure and Sung Bo Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sung Bo Chemicals and Grand 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 Grand Korea Leisure are associated (or correlated) with Sung Bo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sung Bo Chemicals has no effect on the direction of Grand Korea i.e., Grand Korea and Sung Bo go up and down completely randomly.

Pair Corralation between Grand Korea and Sung Bo

Assuming the 90 days trading horizon Grand Korea Leisure is expected to generate 2.36 times more return on investment than Sung Bo. However, Grand Korea is 2.36 times more volatile than Sung Bo Chemicals. It trades about 0.01 of its potential returns per unit of risk. Sung Bo Chemicals is currently generating about -0.11 per unit of risk. If you would invest  1,167,000  in Grand Korea Leisure on September 3, 2024 and sell it today you would earn a total of  5,000  from holding Grand Korea Leisure or generate 0.43% return on investment over 90 days.

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

Grand Korea Leisure  vs.  Sung Bo Chemicals

Grand Korea Leisure

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Korea Leisure are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Grand Korea is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sung Bo Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Grand Korea and Sung Bo

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

The idea behind Grand Korea Leisure and Sung Bo Chemicals 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.