Correlation Between Korea Information and Ssangyong Materials

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

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

Diversification Opportunities for Korea Information and Ssangyong Materials

-0.28

Correlation Coefficient

Korea Information  Ssangyong Materials

Very good diversification

The 3 months correlation between Korea and Ssangyong is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Communicatio 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 Korea Information 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 Korea Information Communications 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 Korea Information i.e., Korea Information and Ssangyong Materials go up and down completely randomly.

Pair Corralation between Korea Information and Ssangyong Materials

Assuming the 90 days trading horizon Korea Information Communications is expected to under-perform the Ssangyong Materials. But the stock apears to be less risky and, when comparing its historical volatility, Korea Information Communications is 2.84 times less risky than Ssangyong Materials. The stock trades about -0.04 of its potential returns per unit of risk. The Ssangyong Materials Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  210,500  in Ssangyong Materials Corp on September 12, 2024 and sell it today you would earn a total of  19,000  from holding Ssangyong Materials Corp or generate 9.03% return on investment over 90 days.

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

Korea Information Communicatio  vs.  Ssangyong Materials Corp

Korea Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Information 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

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ssangyong Materials Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ssangyong Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korea Information and Ssangyong Materials

The main advantage of trading using opposite Korea Information and Ssangyong Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Information 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 Korea Information Communications 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.