Correlation Between Semyung Electric and Daekyung Machinery

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

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

Diversification Opportunities for Semyung Electric and Daekyung Machinery

-0.3

Correlation Coefficient

Semyung Electric  Daekyung Machinery

Very good diversification

The 3 months correlation between Semyung and Daekyung is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Semyung Electric Machinery and Daekyung Machinery Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daekyung Machinery and Semyung Electric 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 Semyung Electric Machinery are associated (or correlated) with Daekyung Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daekyung Machinery has no effect on the direction of Semyung Electric i.e., Semyung Electric and Daekyung Machinery go up and down completely randomly.

Pair Corralation between Semyung Electric and Daekyung Machinery

Assuming the 90 days trading horizon Semyung Electric Machinery is expected to under-perform the Daekyung Machinery. In addition to that, Semyung Electric is 1.05 times more volatile than Daekyung Machinery Engineering. It trades about -0.1 of its total potential returns per unit of risk. Daekyung Machinery Engineering is currently generating about 0.11 per unit of volatility. If you would invest  43,500  in Daekyung Machinery Engineering on September 4, 2024 and sell it today you would earn a total of  8,000  from holding Daekyung Machinery Engineering or generate 18.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

Semyung Electric Machinery  vs.  Daekyung Machinery Engineering

Semyung Electric Mac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Semyung Electric Machinery 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.

Daekyung Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daekyung Machinery Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daekyung Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Semyung Electric and Daekyung Machinery

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

The idea behind Semyung Electric Machinery and Daekyung Machinery Engineering 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.