Correlation Between Chorokbaem Healthcare and Sewoon Medical

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

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

Diversification Opportunities for Chorokbaem Healthcare and Sewoon Medical

0.85

Correlation Coefficient

Chorokbaem Healthcare  Sewoon Medical

Very poor diversification

The 3 months correlation between Chorokbaem and Sewoon is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Chorokbaem Healthcare Co and Sewoon Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sewoon Medical and Chorokbaem Healthcare 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 Chorokbaem Healthcare Co are associated (or correlated) with Sewoon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sewoon Medical has no effect on the direction of Chorokbaem Healthcare i.e., Chorokbaem Healthcare and Sewoon Medical go up and down completely randomly.

Pair Corralation between Chorokbaem Healthcare and Sewoon Medical

Assuming the 90 days trading horizon Chorokbaem Healthcare Co is expected to under-perform the Sewoon Medical. But the stock apears to be less risky and, when comparing its historical volatility, Chorokbaem Healthcare Co is 1.16 times less risky than Sewoon Medical. The stock trades about -0.16 of its potential returns per unit of risk. The Sewoon Medical Co is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  260,000  in Sewoon Medical Co on September 21, 2024 and sell it today you would lose (17,000) from holding Sewoon Medical Co or give up 6.54% of portfolio value over 90 days.

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

Chorokbaem Healthcare Co  vs.  Sewoon Medical Co

Chorokbaem Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sewoon Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sewoon Medical Co 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.

Pair Trading with Chorokbaem Healthcare and Sewoon Medical

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

The idea behind Chorokbaem Healthcare Co and Sewoon Medical 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.