Correlation Between TOPMATERIAL and Shinsegae Food

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

By analyzing existing cross correlation between TOPMATERIAL LTD and Shinsegae Food, you can compare the effects of market volatilities on TOPMATERIAL and Shinsegae Food 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 TOPMATERIAL with a short position of Shinsegae Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOPMATERIAL and Shinsegae Food.

Diversification Opportunities for TOPMATERIAL and Shinsegae Food

-0.2

Correlation Coefficient

TOPMATERIAL  Shinsegae Food

Good diversification

The 3 months correlation between TOPMATERIAL and Shinsegae is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Shinsegae Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Food and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Shinsegae Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Food has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Shinsegae Food go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Shinsegae Food

Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to generate 2.84 times more return on investment than Shinsegae Food. However, TOPMATERIAL is 2.84 times more volatile than Shinsegae Food. It trades about 0.05 of its potential returns per unit of risk. Shinsegae Food is currently generating about -0.12 per unit of risk. If you would invest  2,615,000  in TOPMATERIAL LTD on December 28, 2024 and sell it today you would earn a total of  215,000  from holding TOPMATERIAL LTD or generate 8.22% return on investment over 90 days.

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

TOPMATERIAL LTD  vs.  Shinsegae Food

TOPMATERIAL LTD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TOPMATERIAL LTD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TOPMATERIAL sustained solid returns over the last few months and may actually be approaching a breakup point.

Shinsegae Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shinsegae Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TOPMATERIAL and Shinsegae Food

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

The idea behind TOPMATERIAL LTD and Shinsegae Food 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.