Correlation Between Seoul Electronics and Sangshin Electronics
Can any of the company-specific risk be diversified away by investing in both Seoul Electronics and Sangshin Electronics 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 Sangshin Electronics 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 Sangshin Electronics Co, you can compare the effects of market volatilities on Seoul Electronics and Sangshin Electronics 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 Sangshin Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Electronics and Sangshin Electronics.
Diversification Opportunities for Seoul Electronics and Sangshin Electronics
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Seoul and Sangshin is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Electronics Telecom and Sangshin Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sangshin Electronics 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 Sangshin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sangshin Electronics has no effect on the direction of Seoul Electronics i.e., Seoul Electronics and Sangshin Electronics go up and down completely randomly.
Pair Corralation between Seoul Electronics and Sangshin Electronics
Assuming the 90 days trading horizon Seoul Electronics Telecom is expected to generate 0.83 times more return on investment than Sangshin Electronics. However, Seoul Electronics Telecom is 1.2 times less risky than Sangshin Electronics. It trades about -0.08 of its potential returns per unit of risk. Sangshin Electronics Co is currently generating about -0.29 per unit of risk. If you would invest 26,100 in Seoul Electronics Telecom on August 28, 2024 and sell it today you would lose (700.00) from holding Seoul Electronics Telecom or give up 2.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seoul Electronics Telecom vs. Sangshin Electronics Co
Performance |
| Timeline |
| Seoul Electronics Telecom |
| Sangshin Electronics |
Seoul Electronics and Sangshin Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Electronics and Sangshin Electronics
The main advantage of trading using opposite Seoul Electronics and Sangshin Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Electronics position performs unexpectedly, Sangshin Electronics 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 Sangshin Electronics will offset losses from the drop in Sangshin Electronics' long position.| Seoul Electronics vs. Samsung Electronics Co | Seoul Electronics vs. Samsung Electronics Co | Seoul Electronics vs. Hyundai Motor Co | Seoul Electronics vs. Hyundai Motor |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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