Correlation Between Interflex and Seoul Semiconductor
Can any of the company-specific risk be diversified away by investing in both Interflex and Seoul Semiconductor 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 Interflex and Seoul Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Interflex Co and Seoul Semiconductor Co, you can compare the effects of market volatilities on Interflex and Seoul Semiconductor 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 Interflex with a short position of Seoul Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interflex and Seoul Semiconductor.
Diversification Opportunities for Interflex and Seoul Semiconductor
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Interflex and Seoul is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Interflex Co and Seoul Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Semiconductor and Interflex 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 Interflex Co are associated (or correlated) with Seoul Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Semiconductor has no effect on the direction of Interflex i.e., Interflex and Seoul Semiconductor go up and down completely randomly.
Pair Corralation between Interflex and Seoul Semiconductor
Assuming the 90 days trading horizon Interflex Co is expected to generate 1.77 times more return on investment than Seoul Semiconductor. However, Interflex is 1.77 times more volatile than Seoul Semiconductor Co. It trades about 0.0 of its potential returns per unit of risk. Seoul Semiconductor Co is currently generating about -0.06 per unit of risk. If you would invest 1,039,000 in Interflex Co on September 1, 2024 and sell it today you would lose (164,000) from holding Interflex Co or give up 15.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Interflex Co vs. Seoul Semiconductor Co
Performance |
| Timeline |
| Interflex |
| Seoul Semiconductor |
Interflex and Seoul Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Interflex and Seoul Semiconductor
The main advantage of trading using opposite Interflex and Seoul Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interflex position performs unexpectedly, Seoul Semiconductor 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 Seoul Semiconductor will offset losses from the drop in Seoul Semiconductor's long position.The idea behind Interflex Co and Seoul Semiconductor Co 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.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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