Correlation Between Kakao Games and Sunny Electronics

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Can any of the company-specific risk be diversified away by investing in both Kakao Games and Sunny 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 Kakao Games and Sunny Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kakao Games Corp and Sunny Electronics Corp, you can compare the effects of market volatilities on Kakao Games and Sunny 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 Kakao Games with a short position of Sunny Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kakao Games and Sunny Electronics.

Diversification Opportunities for Kakao Games and Sunny Electronics

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Kakao and Sunny is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Kakao Games Corp and Sunny Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Electronics Corp and Kakao Games 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 Kakao Games Corp are associated (or correlated) with Sunny Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Electronics Corp has no effect on the direction of Kakao Games i.e., Kakao Games and Sunny Electronics go up and down completely randomly.

Pair Corralation between Kakao Games and Sunny Electronics

Assuming the 90 days trading horizon Kakao Games Corp is expected to generate 1.27 times more return on investment than Sunny Electronics. However, Kakao Games is 1.27 times more volatile than Sunny Electronics Corp. It trades about 0.06 of its potential returns per unit of risk. Sunny Electronics Corp is currently generating about 0.03 per unit of risk. If you would invest  1,770,000  in Kakao Games Corp on September 3, 2024 and sell it today you would earn a total of  45,000  from holding Kakao Games Corp or generate 2.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Kakao Games Corp  vs.  Sunny Electronics Corp

 Performance 
       Timeline  
Kakao Games Corp 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Kakao Games Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kakao Games is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Sunny Electronics Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Electronics Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sunny Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kakao Games and Sunny Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kakao Games and Sunny Electronics

The main advantage of trading using opposite Kakao Games and Sunny Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kakao Games position performs unexpectedly, Sunny 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 Sunny Electronics will offset losses from the drop in Sunny Electronics' long position.
The idea behind Kakao Games Corp and Sunny Electronics Corp 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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