Correlation Between Korea Environment and Seoul Semiconductor

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

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

Diversification Opportunities for Korea Environment and Seoul Semiconductor

-0.94

Correlation Coefficient

Korea Environment  Seoul Semiconductor

Pay attention - limited upside

The 3 months correlation between Korea and Seoul is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Korea Environment Technology and Seoul Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Semiconductor and Korea Environment 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 Korea Environment Technology are associated (or correlated) with Seoul Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Semiconductor has no effect on the direction of Korea Environment i.e., Korea Environment and Seoul Semiconductor go up and down completely randomly.

Pair Corralation between Korea Environment and Seoul Semiconductor

Assuming the 90 days trading horizon Korea Environment is expected to generate 1.21 times less return on investment than Seoul Semiconductor. But when comparing it to its historical volatility, Korea Environment Technology is 1.76 times less risky than Seoul Semiconductor. It trades about 0.23 of its potential returns per unit of risk. Seoul Semiconductor Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  679,384  in Seoul Semiconductor Co on October 6, 2024 and sell it today you would earn a total of  43,616  from holding Seoul Semiconductor Co or generate 6.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Korea Environment Technology  vs.  Seoul Semiconductor Co

Korea Environment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Environment Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Seoul Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoul Semiconductor Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Korea Environment and Seoul Semiconductor

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

The idea behind Korea Environment Technology and Seoul Semiconductor 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.