Correlation Between Keyang Electric and Seojin Automotive

Can any of the company-specific risk be diversified away by investing in both Keyang Electric and Seojin Automotive 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 Keyang Electric and Seojin Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keyang Electric Machinery and Seojin Automotive CoLtd, you can compare the effects of market volatilities on Keyang Electric and Seojin Automotive 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 Keyang Electric with a short position of Seojin Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keyang Electric and Seojin Automotive.

Diversification Opportunities for Keyang Electric and Seojin Automotive

0.38

Correlation Coefficient

Keyang Electric  Seojin Automotive

Weak diversification

The 3 months correlation between Keyang and Seojin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Keyang Electric Machinery and Seojin Automotive CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seojin Automotive CoLtd and Keyang Electric 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 Keyang Electric Machinery are associated (or correlated) with Seojin Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seojin Automotive CoLtd has no effect on the direction of Keyang Electric i.e., Keyang Electric and Seojin Automotive go up and down completely randomly.

Pair Corralation between Keyang Electric and Seojin Automotive

Assuming the 90 days trading horizon Keyang Electric Machinery is expected to generate 1.4 times more return on investment than Seojin Automotive. However, Keyang Electric is 1.4 times more volatile than Seojin Automotive CoLtd. It trades about -0.01 of its potential returns per unit of risk. Seojin Automotive CoLtd is currently generating about -0.05 per unit of risk. If you would invest  346,000  in Keyang Electric Machinery on December 23, 2024 and sell it today you would lose (8,000) from holding Keyang Electric Machinery or give up 2.31% of portfolio value over 90 days.

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

Keyang Electric Machinery  vs.  Seojin Automotive CoLtd

Keyang Electric Machinery

Risk-Adjusted Performance

Very Weak

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

Seojin Automotive CoLtd

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Keyang Electric and Seojin Automotive

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

The idea behind Keyang Electric Machinery and Seojin Automotive 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.