Correlation Between Seoul Electronics and Woorim Machinery
Can any of the company-specific risk be diversified away by investing in both Seoul Electronics and Woorim Machinery 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 Electronics and Woorim Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seoul Electronics Telecom and Woorim Machinery Co, you can compare the effects of market volatilities on Seoul Electronics and Woorim Machinery 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 Electronics with a short position of Woorim Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Electronics and Woorim Machinery.
Diversification Opportunities for Seoul Electronics and Woorim Machinery
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Seoul and Woorim is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Electronics Telecom and Woorim Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woorim Machinery and Seoul Electronics 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 Electronics Telecom are associated (or correlated) with Woorim Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woorim Machinery has no effect on the direction of Seoul Electronics i.e., Seoul Electronics and Woorim Machinery go up and down completely randomly.
Pair Corralation between Seoul Electronics and Woorim Machinery
Assuming the 90 days trading horizon Seoul Electronics Telecom is expected to generate 0.75 times more return on investment than Woorim Machinery. However, Seoul Electronics Telecom is 1.34 times less risky than Woorim Machinery. It trades about 0.4 of its potential returns per unit of risk. Woorim Machinery Co is currently generating about 0.16 per unit of risk. If you would invest 22,100 in Seoul Electronics Telecom on October 15, 2024 and sell it today you would earn a total of 4,400 from holding Seoul Electronics Telecom or generate 19.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seoul Electronics Telecom vs. Woorim Machinery Co
Performance |
| Timeline |
| Seoul Electronics Telecom |
| Woorim Machinery |
Seoul Electronics and Woorim Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Electronics and Woorim Machinery
The main advantage of trading using opposite Seoul Electronics and Woorim Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Electronics position performs unexpectedly, Woorim Machinery 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 Woorim Machinery will offset losses from the drop in Woorim Machinery's long position.| Seoul Electronics vs. Dongnam Chemical Co | Seoul Electronics vs. Daejung Chemicals Metals | Seoul Electronics vs. Digital Power Communications | Seoul Electronics vs. Tae Kyung Chemical |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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