Correlation Between Sungdo Engineering and Dongwoo Farm

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

By analyzing existing cross correlation between Sungdo Engineering Construction and Dongwoo Farm To, you can compare the effects of market volatilities on Sungdo Engineering and Dongwoo Farm 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 Sungdo Engineering with a short position of Dongwoo Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sungdo Engineering and Dongwoo Farm.

Diversification Opportunities for Sungdo Engineering and Dongwoo Farm

0.76

Correlation Coefficient

Sungdo Engineering  Dongwoo Farm

Poor diversification

The 3 months correlation between Sungdo and Dongwoo is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sungdo Engineering Constructio and Dongwoo Farm To in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoo Farm To and Sungdo Engineering 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 Sungdo Engineering Construction are associated (or correlated) with Dongwoo Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoo Farm To has no effect on the direction of Sungdo Engineering i.e., Sungdo Engineering and Dongwoo Farm go up and down completely randomly.

Pair Corralation between Sungdo Engineering and Dongwoo Farm

Assuming the 90 days trading horizon Sungdo Engineering Construction is expected to generate 1.77 times more return on investment than Dongwoo Farm. However, Sungdo Engineering is 1.77 times more volatile than Dongwoo Farm To. It trades about 0.21 of its potential returns per unit of risk. Dongwoo Farm To is currently generating about 0.04 per unit of risk. If you would invest  432,000  in Sungdo Engineering Construction on October 1, 2024 and sell it today you would earn a total of  46,500  from holding Sungdo Engineering Construction or generate 10.76% return on investment over 90 days.

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

Sungdo Engineering Constructio  vs.  Dongwoo Farm To

Sungdo Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sungdo Engineering and Dongwoo Farm

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

The idea behind Sungdo Engineering Construction and Dongwoo Farm To 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.