Correlation Between Samlip General and Korea Investment

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

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

Diversification Opportunities for Samlip General and Korea Investment

-0.43

Correlation Coefficient

Samlip General  Korea Investment

Very good diversification

The 3 months correlation between Samlip and Korea is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Samlip General Foods and Korea Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Investment Holdings and Samlip General 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 Samlip General Foods are associated (or correlated) with Korea Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Investment Holdings has no effect on the direction of Samlip General i.e., Samlip General and Korea Investment go up and down completely randomly.

Pair Corralation between Samlip General and Korea Investment

Assuming the 90 days trading horizon Samlip General Foods is expected to under-perform the Korea Investment. But the stock apears to be less risky and, when comparing its historical volatility, Samlip General Foods is 1.02 times less risky than Korea Investment. The stock trades about -0.05 of its potential returns per unit of risk. The Korea Investment Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,919,232  in Korea Investment Holdings on July 1, 2024 and sell it today you would earn a total of  1,150,768  from holding Korea Investment Holdings or generate 29.36% return on investment over 90 days.

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

Samlip General Foods  vs.  Korea Investment Holdings

Samlip General Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samlip General Foods 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.

Korea Investment Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Investment Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Investment may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Samlip General and Korea Investment

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

The idea behind Samlip General Foods and Korea Investment Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.