Correlation Between SFA Engineering and Paradise
Can any of the company-specific risk be diversified away by investing in both SFA Engineering and Paradise 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 SFA Engineering and Paradise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SFA Engineering and Paradise Co, you can compare the effects of market volatilities on SFA Engineering and Paradise 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 SFA Engineering with a short position of Paradise. Check out your portfolio center. Please also check ongoing floating volatility patterns of SFA Engineering and Paradise.
Diversification Opportunities for SFA Engineering and Paradise
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SFA and Paradise is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SFA Engineering and Paradise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradise and SFA 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 SFA Engineering are associated (or correlated) with Paradise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradise has no effect on the direction of SFA Engineering i.e., SFA Engineering and Paradise go up and down completely randomly.
Pair Corralation between SFA Engineering and Paradise
Assuming the 90 days trading horizon SFA Engineering is expected to generate 1.19 times more return on investment than Paradise. However, SFA Engineering is 1.19 times more volatile than Paradise Co. It trades about -0.07 of its potential returns per unit of risk. Paradise Co is currently generating about -0.12 per unit of risk. If you would invest 2,801,642 in SFA Engineering on August 31, 2024 and sell it today you would lose (671,642) from holding SFA Engineering or give up 23.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SFA Engineering vs. Paradise Co
Performance |
| Timeline |
| SFA Engineering |
| Paradise |
SFA Engineering and Paradise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SFA Engineering and Paradise
The main advantage of trading using opposite SFA Engineering and Paradise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SFA Engineering position performs unexpectedly, Paradise 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 Paradise will offset losses from the drop in Paradise's long position.| SFA Engineering vs. Dongsin Engineering Construction | SFA Engineering vs. Doosan Fuel Cell | SFA Engineering vs. Daishin Balance 1 | SFA Engineering vs. Total Soft Bank |
| Paradise vs. LG Display | Paradise vs. Hyundai Motor | Paradise vs. Hyundai Motor Co | Paradise vs. Hyundai Motor Co |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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