Correlation Between Lion Chemtech and Seoam Machinery

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

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

Diversification Opportunities for Lion Chemtech and Seoam Machinery

0.03

Correlation Coefficient

Lion Chemtech  Seoam Machinery

Significant diversification

The 3 months correlation between Lion and Seoam is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lion Chemtech Co and Seoam Machinery Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoam Machinery Industry and Lion Chemtech 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 Lion Chemtech Co are associated (or correlated) with Seoam Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoam Machinery Industry has no effect on the direction of Lion Chemtech i.e., Lion Chemtech and Seoam Machinery go up and down completely randomly.

Pair Corralation between Lion Chemtech and Seoam Machinery

Assuming the 90 days trading horizon Lion Chemtech Co is expected to under-perform the Seoam Machinery. In addition to that, Lion Chemtech is 2.21 times more volatile than Seoam Machinery Industry. It trades about -0.31 of its total potential returns per unit of risk. Seoam Machinery Industry is currently generating about 0.25 per unit of volatility. If you would invest  360,421  in Seoam Machinery Industry on October 25, 2024 and sell it today you would earn a total of  25,579  from holding Seoam Machinery Industry or generate 7.1% return on investment over 90 days.

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

Lion Chemtech Co  vs.  Seoam Machinery Industry

Lion Chemtech

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Chemtech Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lion Chemtech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Seoam Machinery Industry

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seoam Machinery Industry are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoam Machinery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lion Chemtech and Seoam Machinery

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

The idea behind Lion Chemtech Co and Seoam Machinery Industry 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.