Correlation Between ECSTELECOM and Sungwoo Electronics

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

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

Diversification Opportunities for ECSTELECOM and Sungwoo Electronics

0.28

Correlation Coefficient

ECSTELECOM  Sungwoo Electronics

Modest diversification

The 3 months correlation between ECSTELECOM and Sungwoo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ECSTELECOM Co and Sungwoo Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungwoo Electronics and ECSTELECOM 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 ECSTELECOM Co are associated (or correlated) with Sungwoo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungwoo Electronics has no effect on the direction of ECSTELECOM i.e., ECSTELECOM and Sungwoo Electronics go up and down completely randomly.

Pair Corralation between ECSTELECOM and Sungwoo Electronics

Assuming the 90 days trading horizon ECSTELECOM is expected to generate 20.65 times less return on investment than Sungwoo Electronics. But when comparing it to its historical volatility, ECSTELECOM Co is 1.96 times less risky than Sungwoo Electronics. It trades about 0.0 of its potential returns per unit of risk. Sungwoo Electronics Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  344,500  in Sungwoo Electronics Co on September 5, 2024 and sell it today you would earn a total of  22,500  from holding Sungwoo Electronics Co or generate 6.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

ECSTELECOM Co  vs.  Sungwoo Electronics Co

ECSTELECOM

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sungwoo Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sungwoo Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sungwoo Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ECSTELECOM and Sungwoo Electronics

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

The idea behind ECSTELECOM Co and Sungwoo Electronics Co 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.