Correlation Between SH Energy and Ssangyong Materials

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

By analyzing existing cross correlation between SH Energy Chemical and Ssangyong Materials Corp, you can compare the effects of market volatilities on SH Energy and Ssangyong Materials 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 SH Energy with a short position of Ssangyong Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of SH Energy and Ssangyong Materials.

Diversification Opportunities for SH Energy and Ssangyong Materials

0.07

Correlation Coefficient

SH Energy  Ssangyong Materials

Significant diversification

The 3 months correlation between 002360 and Ssangyong is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding SH Energy Chemical and Ssangyong Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ssangyong Materials Corp and SH Energy 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 SH Energy Chemical are associated (or correlated) with Ssangyong Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ssangyong Materials Corp has no effect on the direction of SH Energy i.e., SH Energy and Ssangyong Materials go up and down completely randomly.

Pair Corralation between SH Energy and Ssangyong Materials

Assuming the 90 days trading horizon SH Energy Chemical is expected to under-perform the Ssangyong Materials. In addition to that, SH Energy is 1.13 times more volatile than Ssangyong Materials Corp. It trades about 0.0 of its total potential returns per unit of risk. Ssangyong Materials Corp is currently generating about 0.04 per unit of volatility. If you would invest  210,500  in Ssangyong Materials Corp on September 12, 2024 and sell it today you would earn a total of  8,000  from holding Ssangyong Materials Corp or generate 3.8% return on investment over 90 days.

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

SH Energy Chemical  vs.  Ssangyong Materials Corp

SH Energy Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ssangyong Materials Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ssangyong Materials Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ssangyong Materials may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SH Energy and Ssangyong Materials

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

The idea behind SH Energy Chemical and Ssangyong Materials Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .