Correlation Between SBI Investment and Gyeongnam Steel

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

By analyzing existing cross correlation between SBI Investment KOREA and Gyeongnam Steel Co, you can compare the effects of market volatilities on SBI Investment and Gyeongnam Steel 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 SBI Investment with a short position of Gyeongnam Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Investment and Gyeongnam Steel.

Diversification Opportunities for SBI Investment and Gyeongnam Steel

0.63

Correlation Coefficient

SBI Investment  Gyeongnam Steel

Poor diversification

The 3 months correlation between SBI and Gyeongnam is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Gyeongnam Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gyeongnam Steel and SBI Investment 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 SBI Investment KOREA are associated (or correlated) with Gyeongnam Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gyeongnam Steel has no effect on the direction of SBI Investment i.e., SBI Investment and Gyeongnam Steel go up and down completely randomly.

Pair Corralation between SBI Investment and Gyeongnam Steel

Assuming the 90 days trading horizon SBI Investment is expected to generate 5.92 times less return on investment than Gyeongnam Steel. But when comparing it to its historical volatility, SBI Investment KOREA is 1.61 times less risky than Gyeongnam Steel. It trades about 0.04 of its potential returns per unit of risk. Gyeongnam Steel Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  281,760  in Gyeongnam Steel Co on October 1, 2024 and sell it today you would earn a total of  178,240  from holding Gyeongnam Steel Co or generate 63.26% return on investment over 90 days.

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

SBI Investment KOREA  vs.  Gyeongnam Steel Co

SBI Investment KOREA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gyeongnam Steel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gyeongnam Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SBI Investment and Gyeongnam Steel

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

The idea behind SBI Investment KOREA and Gyeongnam Steel Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.