Correlation Between Top Material and Seoul Electronics
Can any of the company-specific risk be diversified away by investing in both Top Material and Seoul Electronics 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 Top Material and Seoul Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Top Material Co and Seoul Electronics Telecom, you can compare the effects of market volatilities on Top Material and Seoul Electronics 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 Top Material with a short position of Seoul Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Material and Seoul Electronics.
Diversification Opportunities for Top Material and Seoul Electronics
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Top and Seoul is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and Seoul Electronics Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Electronics Telecom and Top Material 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 Top Material Co are associated (or correlated) with Seoul Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Electronics Telecom has no effect on the direction of Top Material i.e., Top Material and Seoul Electronics go up and down completely randomly.
Pair Corralation between Top Material and Seoul Electronics
Assuming the 90 days trading horizon Top Material Co is expected to under-perform the Seoul Electronics. In addition to that, Top Material is 1.42 times more volatile than Seoul Electronics Telecom. It trades about -0.03 of its total potential returns per unit of risk. Seoul Electronics Telecom is currently generating about 0.35 per unit of volatility. If you would invest 22,100 in Seoul Electronics Telecom on October 16, 2024 and sell it today you would earn a total of 4,000 from holding Seoul Electronics Telecom or generate 18.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Top Material Co vs. Seoul Electronics Telecom
Performance |
| Timeline |
| Top Material |
| Seoul Electronics Telecom |
Top Material and Seoul Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Top Material and Seoul Electronics
The main advantage of trading using opposite Top Material and Seoul Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Material position performs unexpectedly, Seoul Electronics 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 Electronics will offset losses from the drop in Seoul Electronics' long position.| Top Material vs. Hyundai Home Shopping | Top Material vs. Green Cross Medical | Top Material vs. SBI Investment KOREA | Top Material vs. Stic Investments |
| Seoul Electronics vs. Union Materials Corp | Seoul Electronics vs. PI Advanced Materials | Seoul Electronics vs. Top Material Co | Seoul Electronics vs. Miwon Chemicals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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