Correlation Between IQuest and Semyung Electric

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

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

Diversification Opportunities for IQuest and Semyung Electric

0.65

Correlation Coefficient

IQuest  Semyung Electric

Poor diversification

The 3 months correlation between IQuest and Semyung is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding IQuest Co and Semyung Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semyung Electric Mac and IQuest 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 IQuest Co are associated (or correlated) with Semyung Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semyung Electric Mac has no effect on the direction of IQuest i.e., IQuest and Semyung Electric go up and down completely randomly.

Pair Corralation between IQuest and Semyung Electric

Assuming the 90 days trading horizon IQuest is expected to generate 8.0 times less return on investment than Semyung Electric. But when comparing it to its historical volatility, IQuest Co is 2.31 times less risky than Semyung Electric. It trades about 0.04 of its potential returns per unit of risk. Semyung Electric Machinery is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  432,348  in Semyung Electric Machinery on December 1, 2024 and sell it today you would earn a total of  160,652  from holding Semyung Electric Machinery or generate 37.16% return on investment over 90 days.

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

IQuest Co  vs.  Semyung Electric Machinery

IQuest

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IQuest Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IQuest is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Semyung Electric Mac

Risk-Adjusted Performance

OK

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

Pair Trading with IQuest and Semyung Electric

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

The idea behind IQuest Co and Semyung Electric Machinery 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.