Correlation Between Seah Steel and Daihan Pharmaceutical

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

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

Diversification Opportunities for Seah Steel and Daihan Pharmaceutical

0.3

Correlation Coefficient

Seah Steel  Daihan Pharmaceutical

Weak diversification

The 3 months correlation between Seah and Daihan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Seah Steel Corp and Daihan Pharmaceutical CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daihan Pharmaceutical and Seah Steel 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 Seah Steel Corp are associated (or correlated) with Daihan Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daihan Pharmaceutical has no effect on the direction of Seah Steel i.e., Seah Steel and Daihan Pharmaceutical go up and down completely randomly.

Pair Corralation between Seah Steel and Daihan Pharmaceutical

Assuming the 90 days trading horizon Seah Steel is expected to generate 2.86 times less return on investment than Daihan Pharmaceutical. In addition to that, Seah Steel is 1.48 times more volatile than Daihan Pharmaceutical CoLtd. It trades about 0.02 of its total potential returns per unit of risk. Daihan Pharmaceutical CoLtd is currently generating about 0.1 per unit of volatility. If you would invest  2,580,000  in Daihan Pharmaceutical CoLtd on September 4, 2024 and sell it today you would earn a total of  150,000  from holding Daihan Pharmaceutical CoLtd or generate 5.81% return on investment over 90 days.

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

Seah Steel Corp  vs.  Daihan Pharmaceutical CoLtd

Seah Steel Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seah Steel Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Seah Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Daihan Pharmaceutical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daihan Pharmaceutical CoLtd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daihan Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Seah Steel and Daihan Pharmaceutical

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

The idea behind Seah Steel Corp and Daihan Pharmaceutical CoLtd 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.