Correlation Between Dongnam Chemical and Seoul Semiconductor
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Seoul Semiconductor 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 Dongnam Chemical and Seoul Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongnam Chemical Co and Seoul Semiconductor Co, you can compare the effects of market volatilities on Dongnam Chemical and Seoul Semiconductor 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 Dongnam Chemical with a short position of Seoul Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Seoul Semiconductor.
Diversification Opportunities for Dongnam Chemical and Seoul Semiconductor
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dongnam and Seoul is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Seoul Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Semiconductor and Dongnam Chemical 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 Dongnam Chemical Co are associated (or correlated) with Seoul Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Semiconductor has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Seoul Semiconductor go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Seoul Semiconductor
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 0.62 times more return on investment than Seoul Semiconductor. However, Dongnam Chemical Co is 1.6 times less risky than Seoul Semiconductor. It trades about 0.04 of its potential returns per unit of risk. Seoul Semiconductor Co is currently generating about -0.06 per unit of risk. If you would invest 3,092,777 in Dongnam Chemical Co on November 4, 2024 and sell it today you would earn a total of 312,223 from holding Dongnam Chemical Co or generate 10.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Seoul Semiconductor Co
Performance |
| Timeline |
| Dongnam Chemical |
| Seoul Semiconductor |
Dongnam Chemical and Seoul Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Seoul Semiconductor
The main advantage of trading using opposite Dongnam Chemical and Seoul Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Seoul Semiconductor 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 Seoul Semiconductor will offset losses from the drop in Seoul Semiconductor's long position.| Dongnam Chemical vs. LAKE MATERIALS LTD | Dongnam Chemical vs. Kolon Plastics | Dongnam Chemical vs. Hana Materials | Dongnam Chemical vs. EV Advanced Material |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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