Correlation Between Sejong Telecom and RPBio

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

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

Diversification Opportunities for Sejong Telecom and RPBio

0.96

Correlation Coefficient

Sejong Telecom  RPBio

Almost no diversification

The 3 months correlation between Sejong and RPBio is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sejong Telecom and RPBio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPBio Inc and Sejong Telecom 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 Sejong Telecom are associated (or correlated) with RPBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPBio Inc has no effect on the direction of Sejong Telecom i.e., Sejong Telecom and RPBio go up and down completely randomly.

Pair Corralation between Sejong Telecom and RPBio

Assuming the 90 days trading horizon Sejong Telecom is expected to generate 0.62 times more return on investment than RPBio. However, Sejong Telecom is 1.62 times less risky than RPBio. It trades about -0.21 of its potential returns per unit of risk. RPBio Inc is currently generating about -0.15 per unit of risk. If you would invest  51,700  in Sejong Telecom on October 7, 2024 and sell it today you would lose (9,800) from holding Sejong Telecom or give up 18.96% of portfolio value over 90 days.

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

Sejong Telecom  vs.  RPBio Inc

Sejong Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sejong Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RPBio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RPBio Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sejong Telecom and RPBio

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

The idea behind Sejong Telecom and RPBio Inc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.