Correlation Between ChipsMedia and Seoul Food

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

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

Diversification Opportunities for ChipsMedia and Seoul Food

-0.47

Correlation Coefficient

ChipsMedia  Seoul Food

Very good diversification

The 3 months correlation between ChipsMedia and Seoul is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia and Seoul Food Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Food Industrial and ChipsMedia 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 ChipsMedia are associated (or correlated) with Seoul Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Food Industrial has no effect on the direction of ChipsMedia i.e., ChipsMedia and Seoul Food go up and down completely randomly.

Pair Corralation between ChipsMedia and Seoul Food

Assuming the 90 days trading horizon ChipsMedia is expected to generate 3.44 times more return on investment than Seoul Food. However, ChipsMedia is 3.44 times more volatile than Seoul Food Industrial. It trades about 0.13 of its potential returns per unit of risk. Seoul Food Industrial is currently generating about -0.02 per unit of risk. If you would invest  1,334,017  in ChipsMedia on December 2, 2024 and sell it today you would earn a total of  442,983  from holding ChipsMedia or generate 33.21% return on investment over 90 days.

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

ChipsMedia  vs.  Seoul Food Industrial

ChipsMedia

Risk-Adjusted Performance

OK

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

Seoul Food Industrial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ChipsMedia and Seoul Food

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

The idea behind ChipsMedia and Seoul Food Industrial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.