Correlation Between Seojin Automotive and Phoenix Materials

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

By analyzing existing cross correlation between Seojin Automotive CoLtd and Phoenix Materials Co, you can compare the effects of market volatilities on Seojin Automotive and Phoenix Materials 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 Seojin Automotive with a short position of Phoenix Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seojin Automotive and Phoenix Materials.

Diversification Opportunities for Seojin Automotive and Phoenix Materials

0.39

Correlation Coefficient

Seojin Automotive  Phoenix Materials

Weak diversification

The 3 months correlation between Seojin and Phoenix is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Seojin Automotive CoLtd and Phoenix Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix Materials and Seojin Automotive 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 Seojin Automotive CoLtd are associated (or correlated) with Phoenix Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix Materials has no effect on the direction of Seojin Automotive i.e., Seojin Automotive and Phoenix Materials go up and down completely randomly.

Pair Corralation between Seojin Automotive and Phoenix Materials

Assuming the 90 days trading horizon Seojin Automotive CoLtd is expected to generate 0.26 times more return on investment than Phoenix Materials. However, Seojin Automotive CoLtd is 3.8 times less risky than Phoenix Materials. It trades about -0.06 of its potential returns per unit of risk. Phoenix Materials Co is currently generating about -0.05 per unit of risk. If you would invest  191,600  in Seojin Automotive CoLtd on December 30, 2024 and sell it today you would lose (9,900) from holding Seojin Automotive CoLtd or give up 5.17% of portfolio value over 90 days.

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

Seojin Automotive CoLtd  vs.  Phoenix Materials Co

Seojin Automotive CoLtd

Risk-Adjusted Performance

Very Weak

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

Phoenix Materials

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Seojin Automotive and Phoenix Materials

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

The idea behind Seojin Automotive CoLtd and Phoenix Materials 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.