Correlation Between SBI Investment and Seoam Machinery

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

By analyzing existing cross correlation between SBI Investment KOREA and Seoam Machinery Industry, you can compare the effects of market volatilities on SBI Investment and Seoam Machinery 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 SBI Investment with a short position of Seoam Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Investment and Seoam Machinery.

Diversification Opportunities for SBI Investment and Seoam Machinery

0.01

Correlation Coefficient

SBI Investment  Seoam Machinery

Significant diversification

The 3 months correlation between SBI and Seoam is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry and SBI Investment 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 SBI Investment KOREA are associated (or correlated) with Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of SBI Investment i.e., SBI Investment and Seoam Machinery go up and down completely randomly.

Pair Corralation between SBI Investment and Seoam Machinery

Assuming the 90 days trading horizon SBI Investment KOREA is expected to under-perform the Seoam Machinery. But the stock apears to be less risky and, when comparing its historical volatility, SBI Investment KOREA is 1.1 times less risky than Seoam Machinery. The stock trades about -0.11 of its potential returns per unit of risk. The Seoam Machinery Industry is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  361,907  in Seoam Machinery Industry on December 22, 2024 and sell it today you would lose (4,907) from holding Seoam Machinery Industry or give up 1.36% of portfolio value over 90 days.

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

SBI Investment KOREA  vs.  Seoam Machinery Industry

SBI Investment KOREA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SBI Investment KOREA 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.

Seoam Machinery Industry

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SBI Investment and Seoam Machinery

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

The idea behind SBI Investment KOREA and Seoam Machinery Industry 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.