Correlation Between Sungdo Engineering and Shinsegae Engineering

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

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

Diversification Opportunities for Sungdo Engineering and Shinsegae Engineering

0.26

Correlation Coefficient

Sungdo Engineering  Shinsegae Engineering

Modest diversification

The 3 months correlation between Sungdo and Shinsegae is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sungdo Engineering Constructio and Shinsegae Engineering Construc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Engineering and Sungdo Engineering 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 Sungdo Engineering Construction are associated (or correlated) with Shinsegae Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Engineering has no effect on the direction of Sungdo Engineering i.e., Sungdo Engineering and Shinsegae Engineering go up and down completely randomly.

Pair Corralation between Sungdo Engineering and Shinsegae Engineering

Assuming the 90 days trading horizon Sungdo Engineering Construction is expected to generate 0.74 times more return on investment than Shinsegae Engineering. However, Sungdo Engineering Construction is 1.36 times less risky than Shinsegae Engineering. It trades about 0.13 of its potential returns per unit of risk. Shinsegae Engineering Construction is currently generating about -0.18 per unit of risk. If you would invest  400,000  in Sungdo Engineering Construction on February 16, 2024 and sell it today you would earn a total of  35,000  from holding Sungdo Engineering Construction or generate 8.75% return on investment over 90 days.

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

Sungdo Engineering Constructio  vs.  Shinsegae Engineering Construc

Sungdo Engineering

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sungdo Engineering Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sungdo Engineering may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Shinsegae Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinsegae Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sungdo Engineering and Shinsegae Engineering

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

The idea behind Sungdo Engineering Construction and Shinsegae Engineering Construction 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 Commodity Directory module to find actively traded commodities issued by global exchanges.