Correlation Between SFA Engineering and Seoul Semiconductor

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

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

Diversification Opportunities for SFA Engineering and Seoul Semiconductor

-0.38

Correlation Coefficient

SFA Engineering  Seoul Semiconductor

Very good diversification

The 3 months correlation between SFA and Seoul is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding SFA Engineering and Seoul Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Semiconductor and SFA Engineering 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 SFA Engineering are associated (or correlated) with Seoul Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Semiconductor has no effect on the direction of SFA Engineering i.e., SFA Engineering and Seoul Semiconductor go up and down completely randomly.

Pair Corralation between SFA Engineering and Seoul Semiconductor

Assuming the 90 days trading horizon SFA Engineering is expected to under-perform the Seoul Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, SFA Engineering is 1.06 times less risky than Seoul Semiconductor. The stock trades about -0.01 of its potential returns per unit of risk. The Seoul Semiconductor Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  708,838  in Seoul Semiconductor Co on November 28, 2024 and sell it today you would earn a total of  4,162  from holding Seoul Semiconductor Co or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

SFA Engineering  vs.  Seoul Semiconductor Co

SFA Engineering

Risk-Adjusted Performance

Very Weak

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

Seoul Semiconductor

Risk-Adjusted Performance

Weak

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

Pair Trading with SFA Engineering and Seoul Semiconductor

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

The idea behind SFA Engineering and Seoul Semiconductor Co 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.