Correlation Between Shinsegae Engineering and Vissem Electronics

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

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

Diversification Opportunities for Shinsegae Engineering and Vissem Electronics

0.77

Correlation Coefficient

Shinsegae Engineering  Vissem Electronics

Poor diversification

The 3 months correlation between Shinsegae and Vissem is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Engineering Construc and Vissem Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vissem Electronics and Shinsegae Engineering 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 Shinsegae Engineering Construction are associated (or correlated) with Vissem Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vissem Electronics has no effect on the direction of Shinsegae Engineering i.e., Shinsegae Engineering and Vissem Electronics go up and down completely randomly.

Pair Corralation between Shinsegae Engineering and Vissem Electronics

Assuming the 90 days trading horizon Shinsegae Engineering Construction is expected to generate 0.05 times more return on investment than Vissem Electronics. However, Shinsegae Engineering Construction is 18.29 times less risky than Vissem Electronics. It trades about -0.04 of its potential returns per unit of risk. Vissem Electronics Co is currently generating about -0.07 per unit of risk. If you would invest  1,817,000  in Shinsegae Engineering Construction on October 11, 2024 and sell it today you would lose (5,000) from holding Shinsegae Engineering Construction or give up 0.28% of portfolio value over 90 days.

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

Shinsegae Engineering Construc  vs.  Vissem Electronics Co

Shinsegae Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vissem Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vissem Electronics Co 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 Shinsegae Engineering and Vissem Electronics

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

The idea behind Shinsegae Engineering Construction and Vissem Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.