Correlation Between Seoul Semiconductor and RFTech

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

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

Diversification Opportunities for Seoul Semiconductor and RFTech

-0.74

Correlation Coefficient

Seoul Semiconductor  RFTech

Pay attention - limited upside

The 3 months correlation between Seoul and RFTech is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Semiconductor Co and RFTech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RFTech and Seoul Semiconductor 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 Seoul Semiconductor Co are associated (or correlated) with RFTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RFTech has no effect on the direction of Seoul Semiconductor i.e., Seoul Semiconductor and RFTech go up and down completely randomly.

Pair Corralation between Seoul Semiconductor and RFTech

Assuming the 90 days trading horizon Seoul Semiconductor is expected to generate 1.38 times less return on investment than RFTech. But when comparing it to its historical volatility, Seoul Semiconductor Co is 1.9 times less risky than RFTech. It trades about 0.26 of its potential returns per unit of risk. RFTech Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  343,000  in RFTech Co on September 30, 2024 and sell it today you would earn a total of  46,000  from holding RFTech Co or generate 13.41% return on investment over 90 days.

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

Seoul Semiconductor Co  vs.  RFTech Co

Seoul Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoul Semiconductor Co 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.

RFTech

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RFTech Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RFTech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seoul Semiconductor and RFTech

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

The idea behind Seoul Semiconductor Co and RFTech Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.