Correlation Between Innowireless and SBI Investment

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

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

Diversification Opportunities for Innowireless and SBI Investment

0.06

Correlation Coefficient

Innowireless  SBI Investment

Significant diversification

The 3 months correlation between Innowireless and SBI is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Innowireless Co and SBI Investment KOREA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Investment KOREA and Innowireless 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 Innowireless Co are associated (or correlated) with SBI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Investment KOREA has no effect on the direction of Innowireless i.e., Innowireless and SBI Investment go up and down completely randomly.

Pair Corralation between Innowireless and SBI Investment

Assuming the 90 days trading horizon Innowireless is expected to generate 1.5 times less return on investment than SBI Investment. But when comparing it to its historical volatility, Innowireless Co is 1.64 times less risky than SBI Investment. It trades about 0.09 of its potential returns per unit of risk. SBI Investment KOREA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  75,800  in SBI Investment KOREA on September 5, 2024 and sell it today you would earn a total of  12,100  from holding SBI Investment KOREA or generate 15.96% return on investment over 90 days.

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

Innowireless Co  vs.  SBI Investment KOREA

Innowireless

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innowireless Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innowireless sustained solid returns over the last few months and may actually be approaching a breakup point.

SBI Investment KOREA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innowireless and SBI Investment

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

The idea behind Innowireless Co and SBI Investment KOREA 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.