Correlation Between INFINITT Healthcare and Sungmoon Electronics
Can any of the company-specific risk be diversified away by investing in both INFINITT Healthcare and Sungmoon Electronics 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 INFINITT Healthcare and Sungmoon Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INFINITT Healthcare Co and Sungmoon Electronics Co, you can compare the effects of market volatilities on INFINITT Healthcare and Sungmoon Electronics 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 INFINITT Healthcare with a short position of Sungmoon Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of INFINITT Healthcare and Sungmoon Electronics.
Diversification Opportunities for INFINITT Healthcare and Sungmoon Electronics
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between INFINITT and Sungmoon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding INFINITT Healthcare Co and Sungmoon Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungmoon Electronics and INFINITT Healthcare 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 INFINITT Healthcare Co are associated (or correlated) with Sungmoon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungmoon Electronics has no effect on the direction of INFINITT Healthcare i.e., INFINITT Healthcare and Sungmoon Electronics go up and down completely randomly.
Pair Corralation between INFINITT Healthcare and Sungmoon Electronics
Assuming the 90 days trading horizon INFINITT Healthcare is expected to generate 1.11 times less return on investment than Sungmoon Electronics. But when comparing it to its historical volatility, INFINITT Healthcare Co is 3.41 times less risky than Sungmoon Electronics. It trades about 0.24 of its potential returns per unit of risk. Sungmoon Electronics Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 470,000 in Sungmoon Electronics Co on October 26, 2024 and sell it today you would earn a total of 20,500 from holding Sungmoon Electronics Co or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INFINITT Healthcare Co vs. Sungmoon Electronics Co
Performance |
| Timeline |
| INFINITT Healthcare |
| Sungmoon Electronics |
INFINITT Healthcare and Sungmoon Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INFINITT Healthcare and Sungmoon Electronics
The main advantage of trading using opposite INFINITT Healthcare and Sungmoon Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INFINITT Healthcare position performs unexpectedly, Sungmoon Electronics 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 Sungmoon Electronics will offset losses from the drop in Sungmoon Electronics' long position.The idea behind INFINITT Healthcare Co and Sungmoon Electronics 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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