Correlation Between Seojin Automotive and TOP Engineering

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

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

Diversification Opportunities for Seojin Automotive and TOP Engineering

-0.6

Correlation Coefficient

Seojin Automotive  TOP Engineering

Excellent diversification

The 3 months correlation between Seojin and TOP is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Seojin Automotive CoLtd and TOP Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Engineering and Seojin Automotive 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 Seojin Automotive CoLtd are associated (or correlated) with TOP Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOP Engineering has no effect on the direction of Seojin Automotive i.e., Seojin Automotive and TOP Engineering go up and down completely randomly.

Pair Corralation between Seojin Automotive and TOP Engineering

Assuming the 90 days trading horizon Seojin Automotive CoLtd is expected to under-perform the TOP Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Seojin Automotive CoLtd is 1.24 times less risky than TOP Engineering. The stock trades about -0.19 of its potential returns per unit of risk. The TOP Engineering Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  418,000  in TOP Engineering Co on September 5, 2024 and sell it today you would earn a total of  24,000  from holding TOP Engineering Co or generate 5.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Seojin Automotive CoLtd  vs.  TOP Engineering Co

Seojin Automotive CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seojin Automotive CoLtd 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.

TOP Engineering

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TOP Engineering Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TOP Engineering may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Seojin Automotive and TOP Engineering

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

The idea behind Seojin Automotive CoLtd and TOP Engineering 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.