Correlation Between Haitai Confectionery and SBI Investment

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

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

Diversification Opportunities for Haitai Confectionery and SBI Investment

0.21

Correlation Coefficient

Haitai Confectionery  SBI Investment

Modest diversification

The 3 months correlation between Haitai and SBI is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Haitai Confectionery Foods 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 Haitai Confectionery 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 Haitai Confectionery Foods 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 Haitai Confectionery i.e., Haitai Confectionery and SBI Investment go up and down completely randomly.

Pair Corralation between Haitai Confectionery and SBI Investment

Assuming the 90 days trading horizon Haitai Confectionery is expected to generate 1.05 times less return on investment than SBI Investment. But when comparing it to its historical volatility, Haitai Confectionery Foods is 2.01 times less risky than SBI Investment. It trades about 0.2 of its potential returns per unit of risk. SBI Investment KOREA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  72,600  in SBI Investment KOREA on September 20, 2024 and sell it today you would earn a total of  7,500  from holding SBI Investment KOREA or generate 10.33% return on investment over 90 days.

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

Haitai Confectionery Foods  vs.  SBI Investment KOREA

Haitai Confectionery

Risk-Adjusted Performance

7 of 100

OK

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

SBI Investment KOREA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Haitai Confectionery and SBI Investment

The main advantage of trading using opposite Haitai Confectionery and SBI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haitai Confectionery 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 Haitai Confectionery Foods 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.

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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.