Correlation Between TOPMATERIAL and Shinsegae Information

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

By analyzing existing cross correlation between TOPMATERIAL LTD and Shinsegae Information Communication, you can compare the effects of market volatilities on TOPMATERIAL and Shinsegae Information 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 TOPMATERIAL with a short position of Shinsegae Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOPMATERIAL and Shinsegae Information.

Diversification Opportunities for TOPMATERIAL and Shinsegae Information

0.53

Correlation Coefficient

TOPMATERIAL  Shinsegae Information

Very weak diversification

The 3 months correlation between TOPMATERIAL and Shinsegae is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Shinsegae Information Communic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Information and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Shinsegae Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Information has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Shinsegae Information go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Shinsegae Information

Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to under-perform the Shinsegae Information. But the stock apears to be less risky and, when comparing its historical volatility, TOPMATERIAL LTD is 1.08 times less risky than Shinsegae Information. The stock trades about -0.14 of its potential returns per unit of risk. The Shinsegae Information Communication is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  915,000  in Shinsegae Information Communication on September 21, 2024 and sell it today you would earn a total of  141,000  from holding Shinsegae Information Communication or generate 15.41% return on investment over 90 days.

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

TOPMATERIAL LTD  vs.  Shinsegae Information Communic

TOPMATERIAL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPMATERIAL LTD 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.

Shinsegae Information

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with TOPMATERIAL and Shinsegae Information

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

The idea behind TOPMATERIAL LTD and Shinsegae Information Communication 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.