Correlation Between Seoul Food and Daebo Magnetic

Can any of the company-specific risk be diversified away by investing in both Seoul Food and Daebo Magnetic 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 Daebo Magnetic 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 Daebo Magnetic CoLtd, you can compare the effects of market volatilities on Seoul Food and Daebo Magnetic 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 Daebo Magnetic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Food and Daebo Magnetic.

Diversification Opportunities for Seoul Food and Daebo Magnetic

-0.07

Correlation Coefficient

Seoul Food  Daebo Magnetic

Good diversification

The 3 months correlation between Seoul and Daebo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Food Industrial and Daebo Magnetic CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daebo Magnetic CoLtd 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 Daebo Magnetic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daebo Magnetic CoLtd has no effect on the direction of Seoul Food i.e., Seoul Food and Daebo Magnetic go up and down completely randomly.

Pair Corralation between Seoul Food and Daebo Magnetic

Assuming the 90 days trading horizon Seoul Food Industrial is expected to under-perform the Daebo Magnetic. But the stock apears to be less risky and, when comparing its historical volatility, Seoul Food Industrial is 3.14 times less risky than Daebo Magnetic. The stock trades about -0.03 of its potential returns per unit of risk. The Daebo Magnetic CoLtd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,224,000  in Daebo Magnetic CoLtd on December 4, 2024 and sell it today you would earn a total of  82,000  from holding Daebo Magnetic CoLtd or generate 6.7% return on investment over 90 days.

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

Seoul Food Industrial  vs.  Daebo Magnetic CoLtd

Seoul Food Industrial

Risk-Adjusted Performance

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.

Daebo Magnetic CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daebo Magnetic CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daebo Magnetic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Seoul Food and Daebo Magnetic

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

The idea behind Seoul Food Industrial and Daebo Magnetic CoLtd 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.