Correlation Between SEOJEON ELECTRIC and HS Valve

Can any of the company-specific risk be diversified away by investing in both SEOJEON ELECTRIC and HS Valve 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 SEOJEON ELECTRIC and HS Valve into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SEOJEON ELECTRIC MACHINERY and HS Valve Co, you can compare the effects of market volatilities on SEOJEON ELECTRIC and HS Valve 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 SEOJEON ELECTRIC with a short position of HS Valve. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEOJEON ELECTRIC and HS Valve.

Diversification Opportunities for SEOJEON ELECTRIC and HS Valve

0.5

Correlation Coefficient

SEOJEON ELECTRIC  HS Valve

Very weak diversification

The 3 months correlation between SEOJEON and 039610 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SEOJEON ELECTRIC MACHINERY and HS Valve Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HS Valve and SEOJEON ELECTRIC 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 SEOJEON ELECTRIC MACHINERY are associated (or correlated) with HS Valve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HS Valve has no effect on the direction of SEOJEON ELECTRIC i.e., SEOJEON ELECTRIC and HS Valve go up and down completely randomly.

Pair Corralation between SEOJEON ELECTRIC and HS Valve

Assuming the 90 days trading horizon SEOJEON ELECTRIC MACHINERY is expected to generate 0.95 times more return on investment than HS Valve. However, SEOJEON ELECTRIC MACHINERY is 1.05 times less risky than HS Valve. It trades about 0.09 of its potential returns per unit of risk. HS Valve Co is currently generating about 0.06 per unit of risk. If you would invest  397,000  in SEOJEON ELECTRIC MACHINERY on December 4, 2024 and sell it today you would earn a total of  64,500  from holding SEOJEON ELECTRIC MACHINERY or generate 16.25% return on investment over 90 days.

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

SEOJEON ELECTRIC MACHINERY  vs.  HS Valve Co

SEOJEON ELECTRIC MAC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SEOJEON ELECTRIC MACHINERY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SEOJEON ELECTRIC sustained solid returns over the last few months and may actually be approaching a breakup point.

HS Valve

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HS Valve Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HS Valve sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SEOJEON ELECTRIC and HS Valve

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

The idea behind SEOJEON ELECTRIC MACHINERY and HS Valve 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.