Correlation Between Dongbang Transport and Seoam Machinery

Can any of the company-specific risk be diversified away by investing in both Dongbang Transport and Seoam Machinery 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 Dongbang Transport and Seoam Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongbang Transport Logistics and Seoam Machinery Industry, you can compare the effects of market volatilities on Dongbang Transport and Seoam Machinery 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 Dongbang Transport with a short position of Seoam Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and Seoam Machinery.

Diversification Opportunities for Dongbang Transport and Seoam Machinery

0.51

Correlation Coefficient

Dongbang Transport  Seoam Machinery

Very weak diversification

The 3 months correlation between Dongbang and Seoam is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry and Dongbang Transport 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 Dongbang Transport Logistics are associated (or correlated) with Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Seoam Machinery go up and down completely randomly.

Pair Corralation between Dongbang Transport and Seoam Machinery

Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to under-perform the Seoam Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Dongbang Transport Logistics is 1.53 times less risky than Seoam Machinery. The stock trades about -0.13 of its potential returns per unit of risk. The Seoam Machinery Industry is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  393,500  in Seoam Machinery Industry on September 4, 2024 and sell it today you would lose (26,000) from holding Seoam Machinery Industry or give up 6.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dongbang Transport Logistics  vs.  Seoam Machinery Industry

Dongbang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongbang Transport Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoam Machinery Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoam Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongbang Transport and Seoam Machinery

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

The idea behind Dongbang Transport Logistics and Seoam Machinery Industry 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.