Correlation Between Tway Air and SEOJEON ELECTRIC

Can any of the company-specific risk be diversified away by investing in both Tway Air and SEOJEON 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 Tway Air and SEOJEON ELECTRIC 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 SEOJEON ELECTRIC MACHINERY, you can compare the effects of market volatilities on Tway Air and SEOJEON 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 Tway Air with a short position of SEOJEON ELECTRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tway Air and SEOJEON ELECTRIC.

Diversification Opportunities for Tway Air and SEOJEON ELECTRIC

0.63

Correlation Coefficient

Tway Air  SEOJEON ELECTRIC

Poor diversification

The 3 months correlation between Tway and SEOJEON is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tway Air Co and SEOJEON ELECTRIC MACHINERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEOJEON ELECTRIC MAC 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 SEOJEON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEOJEON ELECTRIC MAC has no effect on the direction of Tway Air i.e., Tway Air and SEOJEON ELECTRIC go up and down completely randomly.

Pair Corralation between Tway Air and SEOJEON ELECTRIC

Assuming the 90 days trading horizon Tway Air is expected to generate 2.01 times less return on investment than SEOJEON ELECTRIC. But when comparing it to its historical volatility, Tway Air Co is 1.03 times less risky than SEOJEON ELECTRIC. It trades about 0.17 of its potential returns per unit of risk. SEOJEON ELECTRIC MACHINERY is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  335,000  in SEOJEON ELECTRIC MACHINERY on October 9, 2024 and sell it today you would earn a total of  67,000  from holding SEOJEON ELECTRIC MACHINERY or generate 20.0% return on investment over 90 days.

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

Tway Air Co  vs.  SEOJEON ELECTRIC MACHINERY

Tway Air

Risk-Adjusted Performance

0 of 100

Very Weak

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

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tway Air and SEOJEON ELECTRIC

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

The idea behind Tway Air Co and SEOJEON 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.