Correlation Between Seoul Semiconductor and Daejung Chemicals
Can any of the company-specific risk be diversified away by investing in both Seoul Semiconductor 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 Semiconductor 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 Semiconductor Co and Daejung Chemicals Metals, you can compare the effects of market volatilities on Seoul Semiconductor 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 Semiconductor with a short position of Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Semiconductor and Daejung Chemicals.
Diversification Opportunities for Seoul Semiconductor and Daejung Chemicals
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Seoul and Daejung is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Semiconductor Co 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 Semiconductor 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 Semiconductor Co 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 Semiconductor i.e., Seoul Semiconductor and Daejung Chemicals go up and down completely randomly.
Pair Corralation between Seoul Semiconductor and Daejung Chemicals
Assuming the 90 days trading horizon Seoul Semiconductor Co is expected to generate 1.56 times more return on investment than Daejung Chemicals. However, Seoul Semiconductor is 1.56 times more volatile than Daejung Chemicals Metals. It trades about 0.24 of its potential returns per unit of risk. Daejung Chemicals Metals is currently generating about 0.1 per unit of risk. If you would invest 710,000 in Seoul Semiconductor Co on November 2, 2024 and sell it today you would earn a total of 44,000 from holding Seoul Semiconductor Co or generate 6.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seoul Semiconductor Co vs. Daejung Chemicals Metals
Performance |
| Timeline |
| Seoul Semiconductor |
| Daejung Chemicals Metals |
Seoul Semiconductor and Daejung Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Semiconductor and Daejung Chemicals
The main advantage of trading using opposite Seoul Semiconductor and Daejung Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Semiconductor 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.The idea behind Seoul Semiconductor Co and Daejung Chemicals Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Daejung Chemicals vs. LG Chem | Daejung Chemicals vs. Chunbo Co | Daejung Chemicals vs. DukSan Neolux CoLtd | Daejung Chemicals vs. Hyosung Chemical Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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