Correlation Between DRGEM and Sugentech
Can any of the company-specific risk be diversified away by investing in both DRGEM and Sugentech 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 DRGEM and Sugentech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DRGEM and Sugentech, you can compare the effects of market volatilities on DRGEM and Sugentech 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 DRGEM with a short position of Sugentech. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRGEM and Sugentech.
Diversification Opportunities for DRGEM and Sugentech
Poor diversification
The 3 months correlation between DRGEM and Sugentech is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding DRGEM and Sugentech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sugentech and DRGEM 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 DRGEM are associated (or correlated) with Sugentech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sugentech has no effect on the direction of DRGEM i.e., DRGEM and Sugentech go up and down completely randomly.
Pair Corralation between DRGEM and Sugentech
Assuming the 90 days trading horizon DRGEM is expected to under-perform the Sugentech. But the stock apears to be less risky and, when comparing its historical volatility, DRGEM is 2.24 times less risky than Sugentech. The stock trades about -0.06 of its potential returns per unit of risk. The Sugentech is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 919,798 in Sugentech on September 1, 2024 and sell it today you would lose (367,798) from holding Sugentech or give up 39.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DRGEM vs. Sugentech
Performance |
| Timeline |
| DRGEM |
| Sugentech |
DRGEM and Sugentech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DRGEM and Sugentech
The main advantage of trading using opposite DRGEM and Sugentech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRGEM position performs unexpectedly, Sugentech 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 Sugentech will offset losses from the drop in Sugentech's long position.| DRGEM vs. Cheryong Industrial CoLtd | DRGEM vs. Hyundai Industrial Co | DRGEM vs. SM Entertainment Co | DRGEM vs. Sejong Industrial |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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