Correlation Between Seoul Food and Korea Refractories
Can any of the company-specific risk be diversified away by investing in both Seoul Food and Korea Refractories 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 Seoul Food and Korea Refractories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seoul Food Industrial and Korea Refractories Co, you can compare the effects of market volatilities on Seoul Food and Korea Refractories 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 Seoul Food with a short position of Korea Refractories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Food and Korea Refractories.
Diversification Opportunities for Seoul Food and Korea Refractories
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Seoul and Korea is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Food Industrial and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories and Seoul Food 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 Seoul Food Industrial are associated (or correlated) with Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of Seoul Food i.e., Seoul Food and Korea Refractories go up and down completely randomly.
Pair Corralation between Seoul Food and Korea Refractories
Assuming the 90 days trading horizon Seoul Food Industrial is expected to generate 0.77 times more return on investment than Korea Refractories. However, Seoul Food Industrial is 1.3 times less risky than Korea Refractories. It trades about -0.07 of its potential returns per unit of risk. Korea Refractories Co is currently generating about -0.09 per unit of risk. If you would invest 18,600 in Seoul Food Industrial on September 3, 2024 and sell it today you would lose (3,800) from holding Seoul Food Industrial or give up 20.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seoul Food Industrial vs. Korea Refractories Co
Performance |
| Timeline |
| Seoul Food Industrial |
| Korea Refractories |
Seoul Food and Korea Refractories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Food and Korea Refractories
The main advantage of trading using opposite Seoul Food and Korea Refractories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Food position performs unexpectedly, Korea Refractories 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 Korea Refractories will offset losses from the drop in Korea Refractories' long position.| Seoul Food vs. Neungyule Education | Seoul Food vs. Sangsin Energy Display | Seoul Food vs. FNC Entertainment Co | Seoul Food vs. SKONEC Entertainment Co |
| Korea Refractories vs. Eagon Industrial Co | Korea Refractories vs. Shinhan Financial Group | Korea Refractories vs. Korean Reinsurance Co | Korea Refractories vs. Seoul Food 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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