Correlation Between Sejong Telecom and Solution Advanced

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

By analyzing existing cross correlation between Sejong Telecom and Solution Advanced Technology, you can compare the effects of market volatilities on Sejong Telecom and Solution Advanced 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 Solution Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sejong Telecom and Solution Advanced.

Diversification Opportunities for Sejong Telecom and Solution Advanced

0.76

Correlation Coefficient

Sejong Telecom  Solution Advanced

Poor diversification

The 3 months correlation between Sejong and Solution is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sejong Telecom and Solution Advanced Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Advanced 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 Solution Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Advanced has no effect on the direction of Sejong Telecom i.e., Sejong Telecom and Solution Advanced go up and down completely randomly.

Pair Corralation between Sejong Telecom and Solution Advanced

Assuming the 90 days trading horizon Sejong Telecom is expected to under-perform the Solution Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Sejong Telecom is 1.76 times less risky than Solution Advanced. The stock trades about -0.21 of its potential returns per unit of risk. The Solution Advanced Technology is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  162,900  in Solution Advanced Technology on October 10, 2024 and sell it today you would lose (24,400) from holding Solution Advanced Technology or give up 14.98% of portfolio value over 90 days.

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

Sejong Telecom  vs.  Solution Advanced Technology

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.

Solution Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Advanced Technology 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 Solution Advanced

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

The idea behind Sejong Telecom and Solution Advanced Technology 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.