Correlation Between Korea Real and Seohee Construction

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

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

Diversification Opportunities for Korea Real and Seohee Construction

-0.14

Correlation Coefficient

Korea Real  Seohee Construction

Good diversification

The 3 months correlation between Korea and Seohee is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Korea Real Estate and Seohee Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seohee Construction and Korea Real 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 Real Estate are associated (or correlated) with Seohee Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seohee Construction has no effect on the direction of Korea Real i.e., Korea Real and Seohee Construction go up and down completely randomly.

Pair Corralation between Korea Real and Seohee Construction

Assuming the 90 days trading horizon Korea Real Estate is expected to generate 0.37 times more return on investment than Seohee Construction. However, Korea Real Estate is 2.72 times less risky than Seohee Construction. It trades about 0.05 of its potential returns per unit of risk. Seohee Construction Co is currently generating about -0.04 per unit of risk. If you would invest  98,300  in Korea Real Estate on December 25, 2024 and sell it today you would earn a total of  1,400  from holding Korea Real Estate or generate 1.42% return on investment over 90 days.

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

Korea Real Estate  vs.  Seohee Construction Co

Korea Real Estate

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Korea Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seohee Construction

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Korea Real and Seohee Construction

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

The idea behind Korea Real Estate and Seohee Construction 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.