Correlation Between Shinsegae Information and Seoul Electronics

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

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

Diversification Opportunities for Shinsegae Information and Seoul Electronics

0.44

Correlation Coefficient

Shinsegae Information  Seoul Electronics

Very weak diversification

The 3 months correlation between Shinsegae and Seoul is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Information Communic and Seoul Electronics Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Electronics Telecom and Shinsegae Information 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 Information Communication are associated (or correlated) with Seoul Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Electronics Telecom has no effect on the direction of Shinsegae Information i.e., Shinsegae Information and Seoul Electronics go up and down completely randomly.

Pair Corralation between Shinsegae Information and Seoul Electronics

Assuming the 90 days trading horizon Shinsegae Information Communication is expected to generate 1.24 times more return on investment than Seoul Electronics. However, Shinsegae Information is 1.24 times more volatile than Seoul Electronics Telecom. It trades about 0.12 of its potential returns per unit of risk. Seoul Electronics Telecom is currently generating about 0.04 per unit of risk. If you would invest  870,417  in Shinsegae Information Communication on December 3, 2024 and sell it today you would earn a total of  368,583  from holding Shinsegae Information Communication or generate 42.35% return on investment over 90 days.

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

Shinsegae Information Communic  vs.  Seoul Electronics Telecom

Shinsegae Information

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsegae Information Communication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinsegae Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Seoul Electronics Telecom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seoul Electronics Telecom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoul Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinsegae Information and Seoul Electronics

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

The idea behind Shinsegae Information Communication and Seoul Electronics Telecom 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.