Correlation Between Jeju Beer and Sungwoo Techron

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

By analyzing existing cross correlation between Jeju Beer Co and Sungwoo Techron CoLtd, you can compare the effects of market volatilities on Jeju Beer and Sungwoo Techron 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 Jeju Beer with a short position of Sungwoo Techron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Beer and Sungwoo Techron.

Diversification Opportunities for Jeju Beer and Sungwoo Techron

-0.25

Correlation Coefficient

Jeju Beer  Sungwoo Techron

Very good diversification

The 3 months correlation between Jeju and Sungwoo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Sungwoo Techron CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungwoo Techron CoLtd and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Sungwoo Techron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungwoo Techron CoLtd has no effect on the direction of Jeju Beer i.e., Jeju Beer and Sungwoo Techron go up and down completely randomly.

Pair Corralation between Jeju Beer and Sungwoo Techron

Assuming the 90 days trading horizon Jeju Beer Co is expected to generate 2.5 times more return on investment than Sungwoo Techron. However, Jeju Beer is 2.5 times more volatile than Sungwoo Techron CoLtd. It trades about 0.01 of its potential returns per unit of risk. Sungwoo Techron CoLtd is currently generating about -0.08 per unit of risk. If you would invest  277,000  in Jeju Beer Co on October 4, 2024 and sell it today you would lose (10,000) from holding Jeju Beer Co or give up 3.61% of portfolio value over 90 days.

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

Jeju Beer Co  vs.  Sungwoo Techron CoLtd

Jeju Beer

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sungwoo Techron CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungwoo Techron CoLtd 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.

Pair Trading with Jeju Beer and Sungwoo Techron

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

The idea behind Jeju Beer Co and Sungwoo Techron 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.