Correlation Between Seah Steel and DB Financial

Can any of the company-specific risk be diversified away by investing in both Seah Steel and DB Financial 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 Seah Steel and DB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seah Steel Corp and DB Financial Investment, you can compare the effects of market volatilities on Seah Steel and DB Financial 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 Seah Steel with a short position of DB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seah Steel and DB Financial.

Diversification Opportunities for Seah Steel and DB Financial

0.41

Correlation Coefficient

Seah Steel  DB Financial

Very weak diversification

The 3 months correlation between Seah and 016610 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and Seah Steel 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 Seah Steel Corp are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of Seah Steel i.e., Seah Steel and DB Financial go up and down completely randomly.

Pair Corralation between Seah Steel and DB Financial

Assuming the 90 days trading horizon Seah Steel Corp is expected to generate 2.18 times more return on investment than DB Financial. However, Seah Steel is 2.18 times more volatile than DB Financial Investment. It trades about 0.17 of its potential returns per unit of risk. DB Financial Investment is currently generating about 0.18 per unit of risk. If you would invest  17,480,000  in Seah Steel Corp on November 30, 2024 and sell it today you would earn a total of  6,020,000  from holding Seah Steel Corp or generate 34.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Seah Steel Corp  vs.  DB Financial Investment

Seah Steel Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seah Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

DB Financial Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seah Steel and DB Financial

The main advantage of trading using opposite Seah Steel and DB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seah Steel position performs unexpectedly, DB Financial 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 DB Financial will offset losses from the drop in DB Financial's long position.

The idea behind Seah Steel Corp and DB Financial Investment 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.