Correlation Between Solus Advanced and Songwon Industrial
Can any of the company-specific risk be diversified away by investing in both Solus Advanced and Songwon Industrial 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 Solus Advanced and Songwon Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solus Advanced Materials and Songwon Industrial Co, you can compare the effects of market volatilities on Solus Advanced and Songwon Industrial 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 Solus Advanced with a short position of Songwon Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solus Advanced and Songwon Industrial.
Diversification Opportunities for Solus Advanced and Songwon Industrial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solus and Songwon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Solus Advanced Materials and Songwon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songwon Industrial and Solus Advanced 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 Solus Advanced Materials are associated (or correlated) with Songwon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songwon Industrial has no effect on the direction of Solus Advanced i.e., Solus Advanced and Songwon Industrial go up and down completely randomly.
Pair Corralation between Solus Advanced and Songwon Industrial
Assuming the 90 days trading horizon Solus Advanced is expected to generate 1.47 times less return on investment than Songwon Industrial. In addition to that, Solus Advanced is 2.03 times more volatile than Songwon Industrial Co. It trades about 0.03 of its total potential returns per unit of risk. Songwon Industrial Co is currently generating about 0.09 per unit of volatility. If you would invest 1,128,000 in Songwon Industrial Co on November 8, 2024 and sell it today you would earn a total of 49,000 from holding Songwon Industrial Co or generate 4.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solus Advanced Materials vs. Songwon Industrial Co
Performance |
| Timeline |
| Solus Advanced Materials |
| Songwon Industrial |
Solus Advanced and Songwon Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solus Advanced and Songwon Industrial
The main advantage of trading using opposite Solus Advanced and Songwon Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solus Advanced position performs unexpectedly, Songwon Industrial 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 Songwon Industrial will offset losses from the drop in Songwon Industrial's long position.| Solus Advanced vs. Korea Information Communications | Solus Advanced vs. Nice Information Telecommunication | Solus Advanced vs. SK Telecom Co | Solus Advanced vs. Lotte Data Communication |
| Songwon Industrial vs. Korea Industrial Co | Songwon Industrial vs. Narae Nanotech Corp | Songwon Industrial vs. Kbi Metal Co | Songwon Industrial vs. Hyundai Industrial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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