Correlation Between Humax Holdings and Seoul Food

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

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

Diversification Opportunities for Humax Holdings and Seoul Food

0.46

Correlation Coefficient

Humax Holdings  Seoul Food

Very weak diversification

The 3 months correlation between Humax and Seoul is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Humax Holdings Co and Seoul Food Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Food Industrial and Humax Holdings 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 Humax Holdings Co are associated (or correlated) with Seoul Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Food Industrial has no effect on the direction of Humax Holdings i.e., Humax Holdings and Seoul Food go up and down completely randomly.

Pair Corralation between Humax Holdings and Seoul Food

Assuming the 90 days trading horizon Humax Holdings Co is expected to under-perform the Seoul Food. In addition to that, Humax Holdings is 2.23 times more volatile than Seoul Food Industrial. It trades about -0.21 of its total potential returns per unit of risk. Seoul Food Industrial is currently generating about -0.12 per unit of volatility. If you would invest  16,400  in Seoul Food Industrial on September 14, 2024 and sell it today you would lose (1,600) from holding Seoul Food Industrial or give up 9.76% of portfolio value over 90 days.

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

Humax Holdings Co  vs.  Seoul Food Industrial

Humax Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humax Holdings Co 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.

Seoul Food Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoul Food Industrial 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.

Pair Trading with Humax Holdings and Seoul Food

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

The idea behind Humax Holdings Co and Seoul Food Industrial 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.