Correlation Between Ssangyong Materials and Iljin Materials
Can any of the company-specific risk be diversified away by investing in both Ssangyong Materials and Iljin Materials 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 Ssangyong Materials and Iljin Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ssangyong Materials Corp and Iljin Materials Co, you can compare the effects of market volatilities on Ssangyong Materials and Iljin Materials 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 Ssangyong Materials with a short position of Iljin Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ssangyong Materials and Iljin Materials.
Diversification Opportunities for Ssangyong Materials and Iljin Materials
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ssangyong and Iljin is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ssangyong Materials Corp and Iljin Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iljin Materials and Ssangyong Materials 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 Ssangyong Materials Corp are associated (or correlated) with Iljin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iljin Materials has no effect on the direction of Ssangyong Materials i.e., Ssangyong Materials and Iljin Materials go up and down completely randomly.
Pair Corralation between Ssangyong Materials and Iljin Materials
Assuming the 90 days trading horizon Ssangyong Materials Corp is expected to generate 0.75 times more return on investment than Iljin Materials. However, Ssangyong Materials Corp is 1.33 times less risky than Iljin Materials. It trades about 0.35 of its potential returns per unit of risk. Iljin Materials Co is currently generating about -0.08 per unit of risk. If you would invest 219,000 in Ssangyong Materials Corp on October 21, 2024 and sell it today you would earn a total of 27,000 from holding Ssangyong Materials Corp or generate 12.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ssangyong Materials Corp vs. Iljin Materials Co
Performance |
| Timeline |
| Ssangyong Materials Corp |
| Iljin Materials |
Ssangyong Materials and Iljin Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ssangyong Materials and Iljin Materials
The main advantage of trading using opposite Ssangyong Materials and Iljin Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ssangyong Materials position performs unexpectedly, Iljin Materials 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 Iljin Materials will offset losses from the drop in Iljin Materials' long position.The idea behind Ssangyong Materials Corp and Iljin Materials 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.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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