Correlation Between Kolon Plastics and Sangsangin Investment

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

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

Diversification Opportunities for Kolon Plastics and Sangsangin Investment

-0.67

Correlation Coefficient

Kolon Plastics  Sangsangin Investment

Excellent diversification

The 3 months correlation between Kolon and Sangsangin is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Kolon Plastics and Sangsangin Investment Securiti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sangsangin Investment and Kolon Plastics 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 Kolon Plastics are associated (or correlated) with Sangsangin Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sangsangin Investment has no effect on the direction of Kolon Plastics i.e., Kolon Plastics and Sangsangin Investment go up and down completely randomly.

Pair Corralation between Kolon Plastics and Sangsangin Investment

Assuming the 90 days trading horizon Kolon Plastics is expected to generate 1.99 times more return on investment than Sangsangin Investment. However, Kolon Plastics is 1.99 times more volatile than Sangsangin Investment Securities. It trades about 0.14 of its potential returns per unit of risk. Sangsangin Investment Securities is currently generating about -0.05 per unit of risk. If you would invest  538,000  in Kolon Plastics on December 26, 2024 and sell it today you would earn a total of  76,000  from holding Kolon Plastics or generate 14.13% return on investment over 90 days.

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

Kolon Plastics  vs.  Sangsangin Investment Securiti

Kolon Plastics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kolon Plastics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kolon Plastics sustained solid returns over the last few months and may actually be approaching a breakup point.

Sangsangin Investment

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kolon Plastics and Sangsangin Investment

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

The idea behind Kolon Plastics and Sangsangin Investment Securities 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.