Correlation Between Netmarble Games and Sungdo Engineering

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

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

Diversification Opportunities for Netmarble Games and Sungdo Engineering

0.52

Correlation Coefficient

Netmarble Games  Sungdo Engineering

Very weak diversification

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

Pair Corralation between Netmarble Games and Sungdo Engineering

Assuming the 90 days trading horizon Netmarble Games Corp is expected to under-perform the Sungdo Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Netmarble Games Corp is 1.01 times less risky than Sungdo Engineering. The stock trades about -0.08 of its potential returns per unit of risk. The Sungdo Engineering Construction is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  424,000  in Sungdo Engineering Construction on October 11, 2024 and sell it today you would earn a total of  56,000  from holding Sungdo Engineering Construction or generate 13.21% return on investment over 90 days.

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

Netmarble Games Corp  vs.  Sungdo Engineering Constructio

Netmarble Games Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netmarble Games Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sungdo Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungdo Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sungdo 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 Netmarble Games and Sungdo Engineering

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

The idea behind Netmarble Games Corp and Sungdo 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.