Correlation Between Seoul Electronics and OCI

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

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

Diversification Opportunities for Seoul Electronics and OCI

0.69

Correlation Coefficient

Seoul Electronics  OCI

Poor diversification

The 3 months correlation between Seoul and OCI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Electronics Telecom and OCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCI Co and Seoul 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 Seoul Electronics Telecom are associated (or correlated) with OCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCI Co has no effect on the direction of Seoul Electronics i.e., Seoul Electronics and OCI go up and down completely randomly.

Pair Corralation between Seoul Electronics and OCI

Assuming the 90 days trading horizon Seoul Electronics is expected to generate 1.2 times less return on investment than OCI. But when comparing it to its historical volatility, Seoul Electronics Telecom is 1.88 times less risky than OCI. It trades about 0.57 of its potential returns per unit of risk. OCI Co is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  5,490,000  in OCI Co on October 9, 2024 and sell it today you would earn a total of  1,810,000  from holding OCI Co or generate 32.97% return on investment over 90 days.

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

Seoul Electronics Telecom  vs.  OCI Co

Seoul Electronics Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

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

OCI Co

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Seoul Electronics and OCI

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

The idea behind Seoul Electronics Telecom and OCI 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.