Correlation Between Seojin Automotive and Lion Chemtech

Can any of the company-specific risk be diversified away by investing in both Seojin Automotive and Lion Chemtech 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 Lion Chemtech 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 Lion Chemtech Co, you can compare the effects of market volatilities on Seojin Automotive and Lion Chemtech 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 Lion Chemtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seojin Automotive and Lion Chemtech.

Diversification Opportunities for Seojin Automotive and Lion Chemtech

0.25

Correlation Coefficient

Seojin Automotive  Lion Chemtech

Modest diversification

The 3 months correlation between Seojin and Lion is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Seojin Automotive CoLtd and Lion Chemtech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Chemtech 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 Lion Chemtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Chemtech has no effect on the direction of Seojin Automotive i.e., Seojin Automotive and Lion Chemtech go up and down completely randomly.

Pair Corralation between Seojin Automotive and Lion Chemtech

Assuming the 90 days trading horizon Seojin Automotive CoLtd is expected to under-perform the Lion Chemtech. But the stock apears to be less risky and, when comparing its historical volatility, Seojin Automotive CoLtd is 1.81 times less risky than Lion Chemtech. The stock trades about -0.05 of its potential returns per unit of risk. The Lion Chemtech Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  240,299  in Lion Chemtech Co on December 4, 2024 and sell it today you would lose (5,799) from holding Lion Chemtech Co or give up 2.41% 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.  Lion Chemtech 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.

Lion Chemtech

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Seojin Automotive and Lion Chemtech

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

The idea behind Seojin Automotive CoLtd and Lion Chemtech 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 Global Correlations module to find global opportunities by holding instruments from different markets.