Correlation Between Sejong Telecom and Next Bt
Can any of the company-specific risk be diversified away by investing in both Sejong Telecom and Next Bt 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 Sejong Telecom and Next Bt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sejong Telecom and Next Bt Co, you can compare the effects of market volatilities on Sejong Telecom and Next Bt 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 Sejong Telecom with a short position of Next Bt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sejong Telecom and Next Bt.
Diversification Opportunities for Sejong Telecom and Next Bt
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sejong and Next is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sejong Telecom and Next Bt Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Bt and Sejong Telecom 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 Sejong Telecom are associated (or correlated) with Next Bt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Bt has no effect on the direction of Sejong Telecom i.e., Sejong Telecom and Next Bt go up and down completely randomly.
Pair Corralation between Sejong Telecom and Next Bt
Assuming the 90 days trading horizon Sejong Telecom is expected to generate 0.83 times more return on investment than Next Bt. However, Sejong Telecom is 1.2 times less risky than Next Bt. It trades about -0.04 of its potential returns per unit of risk. Next Bt Co is currently generating about -0.08 per unit of risk. If you would invest 66,540 in Sejong Telecom on September 4, 2024 and sell it today you would lose (23,440) from holding Sejong Telecom or give up 35.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.98% |
| Values | Daily Returns |
Sejong Telecom vs. Next Bt Co
Performance |
| Timeline |
| Sejong Telecom |
| Next Bt |
Sejong Telecom and Next Bt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sejong Telecom and Next Bt
The main advantage of trading using opposite Sejong Telecom and Next Bt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sejong Telecom position performs unexpectedly, Next Bt 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 Next Bt will offset losses from the drop in Next Bt's long position.| Sejong Telecom vs. Korea New Network | Sejong Telecom vs. ICD Co | Sejong Telecom vs. DYPNF CoLtd | Sejong Telecom vs. Busan Industrial Co |
| Next Bt vs. Hyundai Engineering Plastics | Next Bt vs. RF Materials Co | Next Bt vs. Ecoplastic | Next Bt vs. TOPMATERIAL LTD |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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