Correlation Between Semyung Electric and IQuest

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

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

Diversification Opportunities for Semyung Electric and IQuest

-0.21

Correlation Coefficient

Semyung Electric  IQuest

Very good diversification

The 3 months correlation between Semyung and IQuest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Semyung Electric Machinery and IQuest Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQuest and Semyung 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 Semyung Electric Machinery are associated (or correlated) with IQuest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQuest has no effect on the direction of Semyung Electric i.e., Semyung Electric and IQuest go up and down completely randomly.

Pair Corralation between Semyung Electric and IQuest

Assuming the 90 days trading horizon Semyung Electric Machinery is expected to under-perform the IQuest. In addition to that, Semyung Electric is 1.17 times more volatile than IQuest Co. It trades about -0.1 of its total potential returns per unit of risk. IQuest Co is currently generating about 0.05 per unit of volatility. If you would invest  223,500  in IQuest Co on September 4, 2024 and sell it today you would earn a total of  13,500  from holding IQuest Co or generate 6.04% return on investment over 90 days.

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

Semyung Electric Machinery  vs.  IQuest Co

Semyung Electric Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semyung Electric Machinery 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

IQuest

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Semyung Electric and IQuest

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

The idea behind Semyung Electric Machinery and IQuest 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .