Correlation Between Sungmoon Electronics and SEOJEON ELECTRIC

Can any of the company-specific risk be diversified away by investing in both Sungmoon Electronics and SEOJEON ELECTRIC 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 Sungmoon Electronics and SEOJEON ELECTRIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sungmoon Electronics Co and SEOJEON ELECTRIC MACHINERY, you can compare the effects of market volatilities on Sungmoon Electronics and SEOJEON ELECTRIC 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 Sungmoon Electronics with a short position of SEOJEON ELECTRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sungmoon Electronics and SEOJEON ELECTRIC.

Diversification Opportunities for Sungmoon Electronics and SEOJEON ELECTRIC

0.57

Correlation Coefficient

Sungmoon Electronics  SEOJEON ELECTRIC

Very weak diversification

The 3 months correlation between Sungmoon and SEOJEON is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sungmoon Electronics Co and SEOJEON ELECTRIC MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEOJEON ELECTRIC MAC and Sungmoon Electronics 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 Sungmoon Electronics Co are associated (or correlated) with SEOJEON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEOJEON ELECTRIC MAC has no effect on the direction of Sungmoon Electronics i.e., Sungmoon Electronics and SEOJEON ELECTRIC go up and down completely randomly.

Pair Corralation between Sungmoon Electronics and SEOJEON ELECTRIC

Assuming the 90 days trading horizon Sungmoon Electronics is expected to generate 1.28 times less return on investment than SEOJEON ELECTRIC. In addition to that, Sungmoon Electronics is 1.66 times more volatile than SEOJEON ELECTRIC MACHINERY. It trades about 0.15 of its total potential returns per unit of risk. SEOJEON ELECTRIC MACHINERY is currently generating about 0.31 per unit of volatility. If you would invest  335,000  in SEOJEON ELECTRIC MACHINERY on October 10, 2024 and sell it today you would earn a total of  66,000  from holding SEOJEON ELECTRIC MACHINERY or generate 19.7% return on investment over 90 days.

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

Sungmoon Electronics Co  vs.  SEOJEON ELECTRIC MACHINERY

Sungmoon Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sungmoon Electronics and SEOJEON ELECTRIC

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

The idea behind Sungmoon Electronics Co and SEOJEON ELECTRIC MACHINERY 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .