Correlation Between Hotel Shilla and Sempio Foods

Can any of the company-specific risk be diversified away by investing in both Hotel Shilla and Sempio Foods 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 Hotel Shilla and Sempio Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hotel Shilla Co and Sempio Foods Co, you can compare the effects of market volatilities on Hotel Shilla and Sempio Foods 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 Hotel Shilla with a short position of Sempio Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hotel Shilla and Sempio Foods.

Diversification Opportunities for Hotel Shilla and Sempio Foods

0.89

Correlation Coefficient

Hotel Shilla  Sempio Foods

Very poor diversification

The 3 months correlation between Hotel and Sempio is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hotel Shilla Co and Sempio Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempio Foods and Hotel Shilla 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 Hotel Shilla Co are associated (or correlated) with Sempio Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempio Foods has no effect on the direction of Hotel Shilla i.e., Hotel Shilla and Sempio Foods go up and down completely randomly.

Pair Corralation between Hotel Shilla and Sempio Foods

Assuming the 90 days trading horizon Hotel Shilla is expected to generate 10.39 times less return on investment than Sempio Foods. But when comparing it to its historical volatility, Hotel Shilla Co is 3.11 times less risky than Sempio Foods. It trades about 0.09 of its potential returns per unit of risk. Sempio Foods Co is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,250,000  in Sempio Foods Co on October 9, 2024 and sell it today you would earn a total of  330,000  from holding Sempio Foods Co or generate 14.67% return on investment over 90 days.

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

Hotel Shilla Co  vs.  Sempio Foods Co

Hotel Shilla

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Shilla Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sempio Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sempio Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hotel Shilla and Sempio Foods

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

The idea behind Hotel Shilla Co and Sempio Foods 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.