Correlation Between Seojin System and Starbucks

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

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

Diversification Opportunities for Seojin System and Starbucks

0.15

Correlation Coefficient

Seojin System  Starbucks

Average diversification

The 3 months correlation between Seojin and Starbucks is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Seojin System CoLtd and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks and Seojin System 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 System CoLtd are associated (or correlated) with Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Seojin System i.e., Seojin System and Starbucks go up and down completely randomly.

Pair Corralation between Seojin System and Starbucks

Assuming the 90 days trading horizon Seojin System CoLtd is expected to generate 2.21 times more return on investment than Starbucks. However, Seojin System is 2.21 times more volatile than Starbucks. It trades about 0.09 of its potential returns per unit of risk. Starbucks is currently generating about 0.15 per unit of risk. If you would invest  2,425,000  in Seojin System CoLtd on September 5, 2024 and sell it today you would earn a total of  370,000  from holding Seojin System CoLtd or generate 15.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Seojin System CoLtd  vs.  Starbucks

Seojin System CoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Seojin System CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Seojin System sustained solid returns over the last few months and may actually be approaching a breakup point.

Starbucks

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Starbucks showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seojin System and Starbucks

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

The idea behind Seojin System CoLtd and Starbucks 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.