Correlation Between SK Chemicals and MegaStudy

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

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

Diversification Opportunities for SK Chemicals and MegaStudy

-0.36

Correlation Coefficient

SK Chemicals  MegaStudy

Very good diversification

The 3 months correlation between 28513K and MegaStudy is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding SK Chemicals Co and MegaStudy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaStudy and SK Chemicals 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 SK Chemicals Co are associated (or correlated) with MegaStudy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaStudy has no effect on the direction of SK Chemicals i.e., SK Chemicals and MegaStudy go up and down completely randomly.

Pair Corralation between SK Chemicals and MegaStudy

Assuming the 90 days trading horizon SK Chemicals Co is expected to under-perform the MegaStudy. In addition to that, SK Chemicals is 2.87 times more volatile than MegaStudy Co. It trades about -0.13 of its total potential returns per unit of risk. MegaStudy Co is currently generating about 0.11 per unit of volatility. If you would invest  1,120,000  in MegaStudy Co on September 19, 2024 and sell it today you would earn a total of  38,000  from holding MegaStudy Co or generate 3.39% return on investment over 90 days.

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

SK Chemicals Co  vs.  MegaStudy Co

SK Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Chemicals 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.

MegaStudy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MegaStudy Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MegaStudy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SK Chemicals and MegaStudy

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

The idea behind SK Chemicals Co and MegaStudy 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.