Correlation Between Samwon Steel and THiRA-UTECH

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

By analyzing existing cross correlation between Samwon Steel and THiRA UTECH LTD, you can compare the effects of market volatilities on Samwon Steel and THiRA-UTECH 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 Samwon Steel with a short position of THiRA-UTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samwon Steel and THiRA-UTECH.

Diversification Opportunities for Samwon Steel and THiRA-UTECH

0.8

Correlation Coefficient

Samwon Steel  THiRA-UTECH

Very poor diversification

The 3 months correlation between Samwon and THiRA-UTECH is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Samwon Steel and THiRA UTECH LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THiRA UTECH LTD and Samwon Steel 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 Samwon Steel are associated (or correlated) with THiRA-UTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THiRA UTECH LTD has no effect on the direction of Samwon Steel i.e., Samwon Steel and THiRA-UTECH go up and down completely randomly.

Pair Corralation between Samwon Steel and THiRA-UTECH

Assuming the 90 days trading horizon Samwon Steel is expected to under-perform the THiRA-UTECH. But the stock apears to be less risky and, when comparing its historical volatility, Samwon Steel is 2.22 times less risky than THiRA-UTECH. The stock trades about -0.08 of its potential returns per unit of risk. The THiRA UTECH LTD is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  511,000  in THiRA UTECH LTD on September 16, 2024 and sell it today you would lose (27,500) from holding THiRA UTECH LTD or give up 5.38% of portfolio value over 90 days.

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

Samwon Steel  vs.  THiRA UTECH LTD

Samwon Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

THiRA UTECH LTD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Samwon Steel and THiRA-UTECH

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

The idea behind Samwon Steel and THiRA UTECH LTD 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.