Correlation Between Seoam Machinery and HS Valve

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

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

Diversification Opportunities for Seoam Machinery and HS Valve

0.73

Correlation Coefficient

Seoam Machinery  HS Valve

Poor diversification

The 3 months correlation between Seoam and 039610 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Seoam Machinery Industry and HS Valve Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HS Valve and Seoam Machinery 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 Seoam Machinery Industry are associated (or correlated) with HS Valve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HS Valve has no effect on the direction of Seoam Machinery i.e., Seoam Machinery and HS Valve go up and down completely randomly.

Pair Corralation between Seoam Machinery and HS Valve

Assuming the 90 days trading horizon Seoam Machinery Industry is expected to generate 0.65 times more return on investment than HS Valve. However, Seoam Machinery Industry is 1.55 times less risky than HS Valve. It trades about -0.02 of its potential returns per unit of risk. HS Valve Co is currently generating about -0.11 per unit of risk. If you would invest  385,500  in Seoam Machinery Industry on September 12, 2024 and sell it today you would lose (31,000) from holding Seoam Machinery Industry or give up 8.04% of portfolio value over 90 days.

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

Seoam Machinery Industry  vs.  HS Valve Co

Seoam Machinery Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seoam Machinery Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoam Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HS Valve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HS Valve 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.

Pair Trading with Seoam Machinery and HS Valve

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

The idea behind Seoam Machinery Industry and HS Valve 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.