Correlation Between Gyeongnam Steel and Sugentech

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

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

Diversification Opportunities for Gyeongnam Steel and Sugentech

-0.68

Correlation Coefficient

Gyeongnam Steel  Sugentech

Excellent diversification

The 3 months correlation between Gyeongnam and Sugentech is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Sugentech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugentech and Gyeongnam 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 Gyeongnam Steel Co are associated (or correlated) with Sugentech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sugentech has no effect on the direction of Gyeongnam Steel i.e., Gyeongnam Steel and Sugentech go up and down completely randomly.

Pair Corralation between Gyeongnam Steel and Sugentech

Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 0.9 times more return on investment than Sugentech. However, Gyeongnam Steel Co is 1.11 times less risky than Sugentech. It trades about 0.12 of its potential returns per unit of risk. Sugentech is currently generating about 0.03 per unit of risk. If you would invest  300,000  in Gyeongnam Steel Co on September 26, 2024 and sell it today you would earn a total of  214,000  from holding Gyeongnam Steel Co or generate 71.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.18%
Values	Daily Returns

Gyeongnam Steel Co  vs.  Sugentech

Gyeongnam Steel

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gyeongnam Steel Co are ranked lower than 14 (%) 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.

Sugentech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sugentech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gyeongnam Steel and Sugentech

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

The idea behind Gyeongnam Steel Co and Sugentech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.