Correlation Between Sempio Foods and ED
Can any of the company-specific risk be diversified away by investing in both Sempio Foods and ED 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 Sempio Foods and ED into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sempio Foods Co and ED Co, you can compare the effects of market volatilities on Sempio Foods and ED 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 Sempio Foods with a short position of ED. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sempio Foods and ED.
Diversification Opportunities for Sempio Foods and ED
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sempio and ED is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sempio Foods Co and ED Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ED Co and Sempio Foods 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 Sempio Foods Co are associated (or correlated) with ED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ED Co has no effect on the direction of Sempio Foods i.e., Sempio Foods and ED go up and down completely randomly.
Pair Corralation between Sempio Foods and ED
Assuming the 90 days trading horizon Sempio Foods Co is expected to generate 0.35 times more return on investment than ED. However, Sempio Foods Co is 2.82 times less risky than ED. It trades about -0.09 of its potential returns per unit of risk. ED Co is currently generating about -0.07 per unit of risk. If you would invest 2,830,000 in Sempio Foods Co on September 2, 2024 and sell it today you would lose (260,000) from holding Sempio Foods Co or give up 9.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sempio Foods Co vs. ED Co
Performance |
| Timeline |
| Sempio Foods |
| ED Co |
Sempio Foods and ED Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sempio Foods and ED
The main advantage of trading using opposite Sempio Foods and ED positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sempio Foods position performs unexpectedly, ED 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 ED will offset losses from the drop in ED's long position.| Sempio Foods vs. Korea Real Estate | Sempio Foods vs. Korea Ratings Co | Sempio Foods vs. IQuest Co | Sempio Foods vs. Wonbang Tech Co |
| ED vs. Ssangyong Information Communication | ED vs. Mobileleader CoLtd | ED vs. Shinsegae Information Communication | ED vs. Display Tech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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