Correlation Between ENERGYMACHINERY KOREA and SEOJEON ELECTRIC

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

By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and SEOJEON ELECTRIC MACHINERY, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA with a short position of SEOJEON ELECTRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and SEOJEON ELECTRIC.

Diversification Opportunities for ENERGYMACHINERY KOREA and SEOJEON ELECTRIC

0.1

Correlation Coefficient

ENERGYMACHINERY KOREA  SEOJEON ELECTRIC

Average diversification

The 3 months correlation between ENERGYMACHINERY and SEOJEON is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd 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 ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd 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 ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and SEOJEON ELECTRIC go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and SEOJEON ELECTRIC

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to under-perform the SEOJEON ELECTRIC. But the stock apears to be less risky and, when comparing its historical volatility, ENERGYMACHINERY KOREA CoLtd is 2.13 times less risky than SEOJEON ELECTRIC. The stock trades about -0.05 of its potential returns per unit of risk. The SEOJEON ELECTRIC MACHINERY is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  386,500  in SEOJEON ELECTRIC MACHINERY on December 28, 2024 and sell it today you would lose (1,000.00) from holding SEOJEON ELECTRIC MACHINERY or give up 0.26% of portfolio value over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  SEOJEON ELECTRIC MACHINERY

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

Very Weak

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

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SEOJEON ELECTRIC MACHINERY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 ENERGYMACHINERY KOREA and SEOJEON ELECTRIC

The main advantage of trading using opposite ENERGYMACHINERY KOREA and SEOJEON ELECTRIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.