Correlation Between Sangshin Electronics and Organic Tea

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

By analyzing existing cross correlation between Sangshin Electronics Co and Organic Tea Cosmetics, you can compare the effects of market volatilities on Sangshin Electronics and Organic Tea 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 Sangshin Electronics with a short position of Organic Tea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sangshin Electronics and Organic Tea.

Diversification Opportunities for Sangshin Electronics and Organic Tea

-0.32

Correlation Coefficient

Sangshin Electronics  Organic Tea

Very good diversification

The 3 months correlation between Sangshin and Organic is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sangshin Electronics Co and Organic Tea Cosmetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organic Tea Cosmetics and Sangshin Electronics 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 Sangshin Electronics Co are associated (or correlated) with Organic Tea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organic Tea Cosmetics has no effect on the direction of Sangshin Electronics i.e., Sangshin Electronics and Organic Tea go up and down completely randomly.

Pair Corralation between Sangshin Electronics and Organic Tea

Assuming the 90 days trading horizon Sangshin Electronics Co is expected to generate 0.45 times more return on investment than Organic Tea. However, Sangshin Electronics Co is 2.22 times less risky than Organic Tea. It trades about 0.04 of its potential returns per unit of risk. Organic Tea Cosmetics is currently generating about -0.28 per unit of risk. If you would invest  282,500  in Sangshin Electronics Co on December 26, 2024 and sell it today you would earn a total of  5,000  from holding Sangshin Electronics Co or generate 1.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Sangshin Electronics Co  vs.  Organic Tea Cosmetics

Sangshin Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sangshin Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sangshin Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Organic Tea Cosmetics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Organic Tea Cosmetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sangshin Electronics and Organic Tea

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

The idea behind Sangshin Electronics Co and Organic Tea Cosmetics 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 Valuation module to check real value of public entities based on technical and fundamental data.