Correlation Between PJ Metal and SeAH Besteel

Can any of the company-specific risk be diversified away by investing in both PJ Metal and SeAH Besteel 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 PJ Metal and SeAH Besteel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PJ Metal Co and SeAH Besteel Corp, you can compare the effects of market volatilities on PJ Metal and SeAH Besteel 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 PJ Metal with a short position of SeAH Besteel. Check out your portfolio center. Please also check ongoing floating volatility patterns of PJ Metal and SeAH Besteel.

Diversification Opportunities for PJ Metal and SeAH Besteel

-0.17

Correlation Coefficient

PJ Metal  SeAH Besteel

Good diversification

The 3 months correlation between 128660 and SeAH is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding PJ Metal Co and SeAH Besteel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SeAH Besteel Corp and PJ Metal 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 PJ Metal Co are associated (or correlated) with SeAH Besteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SeAH Besteel Corp has no effect on the direction of PJ Metal i.e., PJ Metal and SeAH Besteel go up and down completely randomly.

Pair Corralation between PJ Metal and SeAH Besteel

Assuming the 90 days trading horizon PJ Metal Co is expected to generate 0.9 times more return on investment than SeAH Besteel. However, PJ Metal Co is 1.11 times less risky than SeAH Besteel. It trades about 0.4 of its potential returns per unit of risk. SeAH Besteel Corp is currently generating about -0.17 per unit of risk. If you would invest  270,734  in PJ Metal Co on October 11, 2024 and sell it today you would earn a total of  31,766  from holding PJ Metal Co or generate 11.73% return on investment over 90 days.

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

PJ Metal Co  vs.  SeAH Besteel Corp

PJ Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

SeAH Besteel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PJ Metal and SeAH Besteel

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

The idea behind PJ Metal Co and SeAH Besteel 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.