Correlation Between Tway Air and Seohee Construction

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

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

Diversification Opportunities for Tway Air and Seohee Construction

-0.65

Correlation Coefficient

Tway Air  Seohee Construction

Excellent diversification

The 3 months correlation between Tway and Seohee is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tway Air Co and Seohee Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seohee Construction and Tway Air 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 Tway Air Co are associated (or correlated) with Seohee Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seohee Construction has no effect on the direction of Tway Air i.e., Tway Air and Seohee Construction go up and down completely randomly.

Pair Corralation between Tway Air and Seohee Construction

Assuming the 90 days trading horizon Tway Air is expected to generate 1.63 times less return on investment than Seohee Construction. In addition to that, Tway Air is 1.82 times more volatile than Seohee Construction Co. It trades about 0.02 of its total potential returns per unit of risk. Seohee Construction Co is currently generating about 0.05 per unit of volatility. If you would invest  114,922  in Seohee Construction Co on October 24, 2024 and sell it today you would earn a total of  43,378  from holding Seohee Construction Co or generate 37.75% return on investment over 90 days.

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

Tway Air Co  vs.  Seohee Construction Co

Tway Air

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tway Air Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tway Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Seohee Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seohee Construction Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seohee Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tway Air and Seohee Construction

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

The idea behind Tway Air Co and Seohee Construction 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..