Correlation Between LAKE MATERIALS and SEOJEON ELECTRIC
Can any of the company-specific risk be diversified away by investing in both LAKE MATERIALS and SEOJEON ELECTRIC 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 LAKE MATERIALS and SEOJEON ELECTRIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAKE MATERIALS LTD and SEOJEON ELECTRIC MACHINERY, you can compare the effects of market volatilities on LAKE MATERIALS and SEOJEON ELECTRIC 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 LAKE MATERIALS with a short position of SEOJEON ELECTRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAKE MATERIALS and SEOJEON ELECTRIC.
Diversification Opportunities for LAKE MATERIALS and SEOJEON ELECTRIC
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LAKE and SEOJEON is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding LAKE MATERIALS LTD and SEOJEON ELECTRIC MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEOJEON ELECTRIC MAC and LAKE MATERIALS 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 LAKE MATERIALS LTD are associated (or correlated) with SEOJEON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEOJEON ELECTRIC MAC has no effect on the direction of LAKE MATERIALS i.e., LAKE MATERIALS and SEOJEON ELECTRIC go up and down completely randomly.
Pair Corralation between LAKE MATERIALS and SEOJEON ELECTRIC
Assuming the 90 days trading horizon LAKE MATERIALS is expected to generate 11.26 times less return on investment than SEOJEON ELECTRIC. But when comparing it to its historical volatility, LAKE MATERIALS LTD is 1.51 times less risky than SEOJEON ELECTRIC. It trades about 0.04 of its potential returns per unit of risk. SEOJEON ELECTRIC MACHINERY is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 402,500 in SEOJEON ELECTRIC MACHINERY on October 25, 2024 and sell it today you would earn a total of 119,500 from holding SEOJEON ELECTRIC MACHINERY or generate 29.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LAKE MATERIALS LTD vs. SEOJEON ELECTRIC MACHINERY
Performance |
| Timeline |
| LAKE MATERIALS LTD |
| SEOJEON ELECTRIC MAC |
LAKE MATERIALS and SEOJEON ELECTRIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAKE MATERIALS and SEOJEON ELECTRIC
The main advantage of trading using opposite LAKE MATERIALS and SEOJEON ELECTRIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAKE MATERIALS position performs unexpectedly, SEOJEON ELECTRIC 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 SEOJEON ELECTRIC will offset losses from the drop in SEOJEON ELECTRIC's long position.| LAKE MATERIALS vs. Samsung Electronics Co | LAKE MATERIALS vs. Samsung Electronics Co | LAKE MATERIALS vs. LG Energy Solution | LAKE MATERIALS vs. SK Hynix |
| SEOJEON ELECTRIC vs. Samsung Electronics Co | SEOJEON ELECTRIC vs. Samsung Electronics Co | SEOJEON ELECTRIC vs. KB Financial Group | SEOJEON ELECTRIC vs. Shinhan Financial Group |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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