Correlation Between Seoul Broadcasting and Kolon Plastics

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

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

Diversification Opportunities for Seoul Broadcasting and Kolon Plastics

-0.19

Correlation Coefficient

Seoul Broadcasting  Kolon Plastics

Good diversification

The 3 months correlation between Seoul and Kolon is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Broadcasting System and Kolon Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Plastics and Seoul Broadcasting 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 Broadcasting System are associated (or correlated) with Kolon Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Plastics has no effect on the direction of Seoul Broadcasting i.e., Seoul Broadcasting and Kolon Plastics go up and down completely randomly.

Pair Corralation between Seoul Broadcasting and Kolon Plastics

Assuming the 90 days trading horizon Seoul Broadcasting System is expected to generate 1.31 times more return on investment than Kolon Plastics. However, Seoul Broadcasting is 1.31 times more volatile than Kolon Plastics. It trades about 0.0 of its potential returns per unit of risk. Kolon Plastics is currently generating about -0.03 per unit of risk. If you would invest  3,029,614  in Seoul Broadcasting System on October 10, 2024 and sell it today you would lose (619,614) from holding Seoul Broadcasting System or give up 20.45% of portfolio value over 90 days.

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

Seoul Broadcasting System  vs.  Kolon Plastics

Seoul Broadcasting System

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Seoul Broadcasting System are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoul Broadcasting sustained solid returns over the last few months and may actually be approaching a breakup point.

Kolon Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kolon Plastics 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.

Pair Trading with Seoul Broadcasting and Kolon Plastics

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

The idea behind Seoul Broadcasting System and Kolon Plastics 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 Transaction History module to view history of all your transactions and understand their impact on performance.