Correlation Between Seohee Construction and Union Materials

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

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

Diversification Opportunities for Seohee Construction and Union Materials

-0.39

Correlation Coefficient

Seohee Construction  Union Materials

Very good diversification

The 3 months correlation between Seohee and Union is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Seohee Construction Co and Union Materials Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Materials Corp and Seohee Construction 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 Seohee Construction Co are associated (or correlated) with Union Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Materials Corp has no effect on the direction of Seohee Construction i.e., Seohee Construction and Union Materials go up and down completely randomly.

Pair Corralation between Seohee Construction and Union Materials

Assuming the 90 days trading horizon Seohee Construction Co is expected to generate 0.63 times more return on investment than Union Materials. However, Seohee Construction Co is 1.59 times less risky than Union Materials. It trades about 0.04 of its potential returns per unit of risk. Union Materials Corp is currently generating about 0.01 per unit of risk. If you would invest  157,700  in Seohee Construction Co on October 10, 2024 and sell it today you would earn a total of  5,100  from holding Seohee Construction Co or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Seohee Construction Co  vs.  Union Materials Corp

Seohee Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seohee Construction Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Union Materials Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Materials Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Union Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Seohee Construction and Union Materials

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

The idea behind Seohee Construction Co and Union Materials Corp 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.