Correlation Between Iljin Display and Samwon Steel

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

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

Diversification Opportunities for Iljin Display and Samwon Steel

0.42

Correlation Coefficient

Iljin Display  Samwon Steel

Very weak diversification

The 3 months correlation between Iljin and Samwon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Iljin Display and Samwon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samwon Steel and Iljin Display 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 Iljin Display are associated (or correlated) with Samwon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samwon Steel has no effect on the direction of Iljin Display i.e., Iljin Display and Samwon Steel go up and down completely randomly.

Pair Corralation between Iljin Display and Samwon Steel

Assuming the 90 days trading horizon Iljin Display is expected to under-perform the Samwon Steel. But the stock apears to be less risky and, when comparing its historical volatility, Iljin Display is 1.11 times less risky than Samwon Steel. The stock trades about -0.17 of its potential returns per unit of risk. The Samwon Steel is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  249,500  in Samwon Steel on September 17, 2024 and sell it today you would lose (15,500) from holding Samwon Steel or give up 6.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Iljin Display  vs.  Samwon Steel

Iljin Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iljin Display has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Samwon Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Iljin Display and Samwon Steel 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 Global Correlations module to find global opportunities by holding instruments from different markets.