Correlation Between ICD and Seoul Broadcasting

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

By analyzing existing cross correlation between ICD Co and Seoul Broadcasting System, you can compare the effects of market volatilities on ICD and Seoul Broadcasting 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 ICD with a short position of Seoul Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICD and Seoul Broadcasting.

Diversification Opportunities for ICD and Seoul Broadcasting

0.59

Correlation Coefficient

ICD  Seoul Broadcasting

Very weak diversification

The 3 months correlation between ICD and Seoul is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and Seoul Broadcasting System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Broadcasting System and ICD 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 ICD Co are associated (or correlated) with Seoul Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Broadcasting System has no effect on the direction of ICD i.e., ICD and Seoul Broadcasting go up and down completely randomly.

Pair Corralation between ICD and Seoul Broadcasting

Assuming the 90 days trading horizon ICD Co is expected to under-perform the Seoul Broadcasting. In addition to that, ICD is 2.43 times more volatile than Seoul Broadcasting System. It trades about -0.16 of its total potential returns per unit of risk. Seoul Broadcasting System is currently generating about 0.0 per unit of volatility. If you would invest  1,530,000  in Seoul Broadcasting System on September 5, 2024 and sell it today you would lose (5,000) from holding Seoul Broadcasting System or give up 0.33% of portfolio value over 90 days.

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

ICD Co  vs.  Seoul Broadcasting System

ICD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICD Co 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Seoul Broadcasting System

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ICD and Seoul Broadcasting

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

The idea behind ICD Co and Seoul Broadcasting System 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.