Correlation Between Seohee Construction and Shinsegae Engineering

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

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

Diversification Opportunities for Seohee Construction and Shinsegae Engineering

-0.11

Correlation Coefficient

Seohee Construction  Shinsegae Engineering

Good diversification

The 3 months correlation between Seohee and Shinsegae is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Seohee Construction Co and Shinsegae Engineering Construc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Engineering and Seohee Construction 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 Seohee Construction Co are associated (or correlated) with Shinsegae Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Engineering has no effect on the direction of Seohee Construction i.e., Seohee Construction and Shinsegae Engineering go up and down completely randomly.

Pair Corralation between Seohee Construction and Shinsegae Engineering

Assuming the 90 days trading horizon Seohee Construction is expected to generate 10.68 times less return on investment than Shinsegae Engineering. But when comparing it to its historical volatility, Seohee Construction Co is 1.22 times less risky than Shinsegae Engineering. It trades about 0.03 of its potential returns per unit of risk. Shinsegae Engineering Construction is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,312,000  in Shinsegae Engineering Construction on September 1, 2024 and sell it today you would earn a total of  491,000  from holding Shinsegae Engineering Construction or generate 37.42% return on investment over 90 days.

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

Seohee Construction Co  vs.  Shinsegae Engineering Construc

Seohee Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seohee Construction Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Seohee Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shinsegae Engineering

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsegae Engineering Construction are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinsegae Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seohee Construction and Shinsegae Engineering

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

The idea behind Seohee Construction Co and Shinsegae Engineering Construction 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.