Correlation Between PI Advanced and Seoul Broadcasting

Can any of the company-specific risk be diversified away by investing in both PI Advanced and Seoul Broadcasting 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 PI Advanced and Seoul Broadcasting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PI Advanced Materials and Seoul Broadcasting System, you can compare the effects of market volatilities on PI Advanced and Seoul Broadcasting 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 PI Advanced with a short position of Seoul Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of PI Advanced and Seoul Broadcasting.

Diversification Opportunities for PI Advanced and Seoul Broadcasting

-0.06

Correlation Coefficient

PI Advanced  Seoul Broadcasting

Good diversification

The 3 months correlation between 178920 and Seoul is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding PI Advanced Materials and Seoul Broadcasting System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Broadcasting System and PI Advanced 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 PI Advanced Materials are associated (or correlated) with Seoul Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Broadcasting System has no effect on the direction of PI Advanced i.e., PI Advanced and Seoul Broadcasting go up and down completely randomly.

Pair Corralation between PI Advanced and Seoul Broadcasting

Assuming the 90 days trading horizon PI Advanced Materials is expected to under-perform the Seoul Broadcasting. But the stock apears to be less risky and, when comparing its historical volatility, PI Advanced Materials is 1.03 times less risky than Seoul Broadcasting. The stock trades about -0.02 of its potential returns per unit of risk. The Seoul Broadcasting System is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,063,986  in Seoul Broadcasting System on October 11, 2024 and sell it today you would lose (718,986) from holding Seoul Broadcasting System or give up 23.47% of portfolio value over 90 days.

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

PI Advanced Materials  vs.  Seoul Broadcasting System

PI Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Seoul Broadcasting System

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Seoul Broadcasting System are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoul Broadcasting sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PI Advanced and Seoul Broadcasting

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

The idea behind PI Advanced Materials and Seoul Broadcasting System 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.