Correlation Between Seah Steel and KM

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

By analyzing existing cross correlation between Seah Steel Corp and KM Corporation, you can compare the effects of market volatilities on Seah Steel and KM 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 Seah Steel with a short position of KM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seah Steel and KM.

Diversification Opportunities for Seah Steel and KM

-0.34

Correlation Coefficient

Seah Steel  KM

Very good diversification

The 3 months correlation between Seah and KM is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and KM Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KM Corporation and Seah Steel 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 Seah Steel Corp are associated (or correlated) with KM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KM Corporation has no effect on the direction of Seah Steel i.e., Seah Steel and KM go up and down completely randomly.

Pair Corralation between Seah Steel and KM

Assuming the 90 days trading horizon Seah Steel Corp is expected to generate 1.41 times more return on investment than KM. However, Seah Steel is 1.41 times more volatile than KM Corporation. It trades about 0.25 of its potential returns per unit of risk. KM Corporation is currently generating about 0.0 per unit of risk. If you would invest  11,626,300  in Seah Steel Corp on December 29, 2024 and sell it today you would earn a total of  6,673,700  from holding Seah Steel Corp or generate 57.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Seah Steel Corp  vs.  KM Corp.

Seah Steel Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seah Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

KM Corporation

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Seah Steel and KM

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

The idea behind Seah Steel Corp and KM Corporation 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.