Correlation Between Organic Special and Sung Bo
Can any of the company-specific risk be diversified away by investing in both Organic Special and Sung Bo 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 Organic Special and Sung Bo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Organic Special Pet and Sung Bo Chemicals, you can compare the effects of market volatilities on Organic Special and Sung Bo 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 Organic Special with a short position of Sung Bo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Organic Special and Sung Bo.
Diversification Opportunities for Organic Special and Sung Bo
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Organic and Sung is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Organic Special Pet and Sung Bo Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sung Bo Chemicals and Organic Special 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 Organic Special Pet are associated (or correlated) with Sung Bo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sung Bo Chemicals has no effect on the direction of Organic Special i.e., Organic Special and Sung Bo go up and down completely randomly.
Pair Corralation between Organic Special and Sung Bo
Assuming the 90 days trading horizon Organic Special Pet is expected to under-perform the Sung Bo. In addition to that, Organic Special is 1.6 times more volatile than Sung Bo Chemicals. It trades about -0.06 of its total potential returns per unit of risk. Sung Bo Chemicals is currently generating about -0.02 per unit of volatility. If you would invest 303,878 in Sung Bo Chemicals on September 12, 2024 and sell it today you would lose (49,878) from holding Sung Bo Chemicals or give up 16.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Organic Special Pet vs. Sung Bo Chemicals
Performance |
| Timeline |
| Organic Special Pet |
| Sung Bo Chemicals |
Organic Special and Sung Bo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Organic Special and Sung Bo
The main advantage of trading using opposite Organic Special and Sung Bo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Organic Special position performs unexpectedly, Sung Bo 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 Sung Bo will offset losses from the drop in Sung Bo's long position.| Organic Special vs. Samsung Electronics Co | Organic Special vs. Samsung Electronics Co | Organic Special vs. LG Energy Solution | Organic Special vs. SK Hynix |
| Sung Bo vs. LS Materials | Sung Bo vs. Organic Special Pet | Sung Bo vs. Hyundai Engineering Plastics | Sung Bo vs. Phoenix Materials 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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