Correlation Between Seah Steel and Shin Steel

Can any of the company-specific risk be diversified away by investing in both Seah Steel and Shin Steel 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 Shin Steel 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 Shin Steel Co, you can compare the effects of market volatilities on Seah Steel and Shin Steel 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 Shin Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seah Steel and Shin Steel.

Diversification Opportunities for Seah Steel and Shin Steel

0.26

Correlation Coefficient

Seah Steel  Shin Steel

Modest diversification

The 3 months correlation between Seah and Shin is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and Shin Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Steel 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 Shin Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Steel has no effect on the direction of Seah Steel i.e., Seah Steel and Shin Steel go up and down completely randomly.

Pair Corralation between Seah Steel and Shin Steel

Assuming the 90 days trading horizon Seah Steel is expected to generate 4.44 times less return on investment than Shin Steel. But when comparing it to its historical volatility, Seah Steel Corp is 2.02 times less risky than Shin Steel. It trades about 0.1 of its potential returns per unit of risk. Shin Steel Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  221,500  in Shin Steel Co on October 11, 2024 and sell it today you would earn a total of  25,500  from holding Shin Steel Co or generate 11.51% return on investment over 90 days.

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

Seah Steel Corp  vs.  Shin Steel Co

Seah Steel Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Seah Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shin Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shin Steel 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 Shin Steel

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

The idea behind Seah Steel Corp and Shin Steel 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.