Correlation Between Seoam Machinery and Jeju Semiconductor

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

By analyzing existing cross correlation between Seoam Machinery Industry and Jeju Semiconductor Corp, you can compare the effects of market volatilities on Seoam Machinery and Jeju Semiconductor 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 Seoam Machinery with a short position of Jeju Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoam Machinery and Jeju Semiconductor.

Diversification Opportunities for Seoam Machinery and Jeju Semiconductor

0.61

Correlation Coefficient

Seoam Machinery  Jeju Semiconductor

Poor diversification

The 3 months correlation between Seoam and Jeju is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Seoam Machinery Industry and Jeju Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Semiconductor Corp and Seoam Machinery 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 Seoam Machinery Industry are associated (or correlated) with Jeju Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Semiconductor Corp has no effect on the direction of Seoam Machinery i.e., Seoam Machinery and Jeju Semiconductor go up and down completely randomly.

Pair Corralation between Seoam Machinery and Jeju Semiconductor

Assuming the 90 days trading horizon Seoam Machinery Industry is expected to generate 0.85 times more return on investment than Jeju Semiconductor. However, Seoam Machinery Industry is 1.17 times less risky than Jeju Semiconductor. It trades about -0.07 of its potential returns per unit of risk. Jeju Semiconductor Corp is currently generating about -0.19 per unit of risk. If you would invest  417,500  in Seoam Machinery Industry on September 27, 2024 and sell it today you would lose (53,500) from holding Seoam Machinery Industry or give up 12.81% of portfolio value over 90 days.

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

Seoam Machinery Industry  vs.  Jeju Semiconductor Corp

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoam Machinery Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jeju Semiconductor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeju Semiconductor Corp 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Seoam Machinery and Jeju Semiconductor

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

The idea behind Seoam Machinery Industry and Jeju Semiconductor Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.