Correlation Between Daehan Steel and Semyung Electric

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

By analyzing existing cross correlation between Daehan Steel and Semyung Electric Machinery, you can compare the effects of market volatilities on Daehan Steel and Semyung Electric 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 Daehan Steel with a short position of Semyung Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daehan Steel and Semyung Electric.

Diversification Opportunities for Daehan Steel and Semyung Electric

-0.06

Correlation Coefficient

Daehan Steel  Semyung Electric

Good diversification

The 3 months correlation between Daehan and Semyung is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Daehan Steel and Semyung Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semyung Electric Mac and Daehan Steel 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 Daehan Steel are associated (or correlated) with Semyung Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semyung Electric Mac has no effect on the direction of Daehan Steel i.e., Daehan Steel and Semyung Electric go up and down completely randomly.

Pair Corralation between Daehan Steel and Semyung Electric

Assuming the 90 days trading horizon Daehan Steel is expected to generate 22.77 times less return on investment than Semyung Electric. But when comparing it to its historical volatility, Daehan Steel is 3.58 times less risky than Semyung Electric. It trades about 0.01 of its potential returns per unit of risk. Semyung Electric Machinery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  468,788  in Semyung Electric Machinery on December 24, 2024 and sell it today you would earn a total of  72,212  from holding Semyung Electric Machinery or generate 15.4% return on investment over 90 days.

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

Daehan Steel  vs.  Semyung Electric Machinery

Daehan Steel

Risk-Adjusted Performance

Very Weak

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

Semyung Electric Mac

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Semyung Electric Machinery are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Semyung Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daehan Steel and Semyung Electric

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

The idea behind Daehan Steel and Semyung Electric Machinery 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.