Correlation Between Daewoo SBI and Nuintek CoLtd

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

By analyzing existing cross correlation between Daewoo SBI SPAC and Nuintek CoLtd, you can compare the effects of market volatilities on Daewoo SBI and Nuintek CoLtd 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 Daewoo SBI with a short position of Nuintek CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo SBI and Nuintek CoLtd.

Diversification Opportunities for Daewoo SBI and Nuintek CoLtd

0.08

Correlation Coefficient

Daewoo SBI  Nuintek CoLtd

Significant diversification

The 3 months correlation between Daewoo and Nuintek is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo SBI SPAC and Nuintek CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuintek CoLtd and Daewoo SBI 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 Daewoo SBI SPAC are associated (or correlated) with Nuintek CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuintek CoLtd has no effect on the direction of Daewoo SBI i.e., Daewoo SBI and Nuintek CoLtd go up and down completely randomly.

Pair Corralation between Daewoo SBI and Nuintek CoLtd

Assuming the 90 days trading horizon Daewoo SBI SPAC is expected to generate 1.75 times more return on investment than Nuintek CoLtd. However, Daewoo SBI is 1.75 times more volatile than Nuintek CoLtd. It trades about 0.11 of its potential returns per unit of risk. Nuintek CoLtd is currently generating about 0.15 per unit of risk. If you would invest  280,000  in Daewoo SBI SPAC on October 22, 2024 and sell it today you would earn a total of  12,000  from holding Daewoo SBI SPAC or generate 4.29% return on investment over 90 days.

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

Daewoo SBI SPAC  vs.  Nuintek CoLtd

Daewoo SBI SPAC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Daewoo SBI SPAC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daewoo SBI sustained solid returns over the last few months and may actually be approaching a breakup point.

Nuintek CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daewoo SBI and Nuintek CoLtd

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

The idea behind Daewoo SBI SPAC and Nuintek CoLtd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.