Correlation Between Seoul Electronics and Daejung Chemicals
Can any of the company-specific risk be diversified away by investing in both Seoul Electronics and Daejung Chemicals 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 Daejung Chemicals 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 Daejung Chemicals Metals, you can compare the effects of market volatilities on Seoul Electronics and Daejung Chemicals 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 Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Electronics and Daejung Chemicals.
Diversification Opportunities for Seoul Electronics and Daejung Chemicals
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Seoul and Daejung is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Electronics Telecom and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals 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 Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of Seoul Electronics i.e., Seoul Electronics and Daejung Chemicals go up and down completely randomly.
Pair Corralation between Seoul Electronics and Daejung Chemicals
Assuming the 90 days trading horizon Seoul Electronics Telecom is expected to under-perform the Daejung Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Seoul Electronics Telecom is 1.07 times less risky than Daejung Chemicals. The stock trades about -0.36 of its potential returns per unit of risk. The Daejung Chemicals Metals is currently generating about -0.32 of returns per unit of risk over similar time horizon. If you would invest 1,416,000 in Daejung Chemicals Metals on September 1, 2024 and sell it today you would lose (155,000) from holding Daejung Chemicals Metals or give up 10.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seoul Electronics Telecom vs. Daejung Chemicals Metals
Performance |
| Timeline |
| Seoul Electronics Telecom |
| Daejung Chemicals Metals |
Seoul Electronics and Daejung Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Electronics and Daejung Chemicals
The main advantage of trading using opposite Seoul Electronics and Daejung Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Electronics position performs unexpectedly, Daejung Chemicals 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 Daejung Chemicals will offset losses from the drop in Daejung Chemicals' long position.| Seoul Electronics vs. Korea New Network | Seoul Electronics vs. ICD Co | Seoul Electronics vs. DYPNF CoLtd | Seoul Electronics vs. Busan 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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