Correlation Between Bookook Steel and Samwon Steel

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

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

Diversification Opportunities for Bookook Steel and Samwon Steel

0.72

Correlation Coefficient

Bookook Steel  Samwon Steel

Poor diversification

The 3 months correlation between Bookook and Samwon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bookook Steel and Samwon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samwon Steel and Bookook 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 Bookook Steel are associated (or correlated) with Samwon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samwon Steel has no effect on the direction of Bookook Steel i.e., Bookook Steel and Samwon Steel go up and down completely randomly.

Pair Corralation between Bookook Steel and Samwon Steel

Assuming the 90 days trading horizon Bookook Steel is expected to generate 1.5 times more return on investment than Samwon Steel. However, Bookook Steel is 1.5 times more volatile than Samwon Steel. It trades about 0.05 of its potential returns per unit of risk. Samwon Steel is currently generating about -0.21 per unit of risk. If you would invest  234,500  in Bookook Steel on September 15, 2024 and sell it today you would earn a total of  5,000  from holding Bookook Steel or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Bookook Steel  vs.  Samwon Steel

Bookook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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 Bookook Steel and Samwon Steel

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

The idea behind Bookook Steel and Samwon Steel 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.