Correlation Between Jeju Bank and SillaJen

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

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

Diversification Opportunities for Jeju Bank and SillaJen

0.53

Correlation Coefficient

Jeju Bank  SillaJen

Very weak diversification

The 3 months correlation between Jeju and SillaJen is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Bank and SillaJen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SillaJen and Jeju Bank 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 Jeju Bank are associated (or correlated) with SillaJen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SillaJen has no effect on the direction of Jeju Bank i.e., Jeju Bank and SillaJen go up and down completely randomly.

Pair Corralation between Jeju Bank and SillaJen

Assuming the 90 days trading horizon Jeju Bank is expected to under-perform the SillaJen. But the stock apears to be less risky and, when comparing its historical volatility, Jeju Bank is 1.78 times less risky than SillaJen. The stock trades about -0.15 of its potential returns per unit of risk. The SillaJen is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  290,000  in SillaJen on September 3, 2024 and sell it today you would earn a total of  34,500  from holding SillaJen or generate 11.9% return on investment over 90 days.

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

Jeju Bank  vs.  SillaJen

Jeju Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeju Bank 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SillaJen

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Jeju Bank and SillaJen

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

The idea behind Jeju Bank and SillaJen 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.