Correlation Between Microfriend and Shinsegae Engineering

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

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

Diversification Opportunities for Microfriend and Shinsegae Engineering

0.52

Correlation Coefficient

Microfriend  Shinsegae Engineering

Very weak diversification

The 3 months correlation between Microfriend and Shinsegae is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and Shinsegae Engineering Construc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Engineering and Microfriend 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 Microfriend are associated (or correlated) with Shinsegae Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Engineering has no effect on the direction of Microfriend i.e., Microfriend and Shinsegae Engineering go up and down completely randomly.

Pair Corralation between Microfriend and Shinsegae Engineering

Assuming the 90 days trading horizon Microfriend is expected to generate 49.24 times more return on investment than Shinsegae Engineering. However, Microfriend is 49.24 times more volatile than Shinsegae Engineering Construction. It trades about 0.04 of its potential returns per unit of risk. Shinsegae Engineering Construction is currently generating about 0.2 per unit of risk. If you would invest  322,500  in Microfriend on November 20, 2024 and sell it today you would earn a total of  18,000  from holding Microfriend or generate 5.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.7%
Values	Daily Returns

Microfriend  vs.  Shinsegae Engineering Construc

Microfriend

Risk-Adjusted Performance

Insignificant

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

Shinsegae Engineering

Risk-Adjusted Performance

Good

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

Pair Trading with Microfriend and Shinsegae Engineering

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

The idea behind Microfriend and Shinsegae 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.