Correlation Between Sungchang Autotech and Oriental Precision

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

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

Diversification Opportunities for Sungchang Autotech and Oriental Precision

-0.75

Correlation Coefficient

Sungchang Autotech  Oriental Precision

Pay attention - limited upside

The 3 months correlation between Sungchang and Oriental is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sungchang Autotech Co and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Sungchang Autotech 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 Sungchang Autotech Co are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Sungchang Autotech i.e., Sungchang Autotech and Oriental Precision go up and down completely randomly.

Pair Corralation between Sungchang Autotech and Oriental Precision

Assuming the 90 days trading horizon Sungchang Autotech Co is expected to under-perform the Oriental Precision. But the stock apears to be less risky and, when comparing its historical volatility, Sungchang Autotech Co is 1.69 times less risky than Oriental Precision. The stock trades about -0.07 of its potential returns per unit of risk. The Oriental Precision Engineering is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  418,000  in Oriental Precision Engineering on September 23, 2024 and sell it today you would earn a total of  108,000  from holding Oriental Precision Engineering or generate 25.84% return on investment over 90 days.

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

Sungchang Autotech Co  vs.  Oriental Precision Engineering

Sungchang Autotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sungchang Autotech Co 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.

Oriental Precision

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Precision Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oriental Precision sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sungchang Autotech and Oriental Precision

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

The idea behind Sungchang Autotech Co and Oriental Precision Engineering 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.