Correlation Between Seoul Food and Daewon Media

Can any of the company-specific risk be diversified away by investing in both Seoul Food and Daewon Media 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 Seoul Food and Daewon Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seoul Food Industrial and Daewon Media Co, you can compare the effects of market volatilities on Seoul Food and Daewon Media 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 Seoul Food with a short position of Daewon Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Food and Daewon Media.

Diversification Opportunities for Seoul Food and Daewon Media

0.28

Correlation Coefficient

Seoul Food  Daewon Media

Modest diversification

The 3 months correlation between Seoul and Daewon is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Food Industrial and Daewon Media Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon Media and Seoul Food 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 Seoul Food Industrial are associated (or correlated) with Daewon Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewon Media has no effect on the direction of Seoul Food i.e., Seoul Food and Daewon Media go up and down completely randomly.

Pair Corralation between Seoul Food and Daewon Media

Assuming the 90 days trading horizon Seoul Food Industrial is expected to under-perform the Daewon Media. But the stock apears to be less risky and, when comparing its historical volatility, Seoul Food Industrial is 1.53 times less risky than Daewon Media. The stock trades about -0.04 of its potential returns per unit of risk. The Daewon Media Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  793,545  in Daewon Media Co on October 24, 2024 and sell it today you would earn a total of  61,455  from holding Daewon Media Co or generate 7.74% return on investment over 90 days.

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

Seoul Food Industrial  vs.  Daewon Media Co

Seoul Food Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daewon Media

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Daewon Media Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daewon Media may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Seoul Food and Daewon Media

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

The idea behind Seoul Food Industrial and Daewon Media Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.