Correlation Between Daejoo and Jeong Moon
Can any of the company-specific risk be diversified away by investing in both Daejoo and Jeong Moon 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 Daejoo and Jeong Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejoo Inc and Jeong Moon Information, you can compare the effects of market volatilities on Daejoo and Jeong Moon 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 Daejoo with a short position of Jeong Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo and Jeong Moon.
Diversification Opportunities for Daejoo and Jeong Moon
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daejoo and Jeong is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Inc and Jeong Moon Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeong Moon Information and Daejoo 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 Daejoo Inc are associated (or correlated) with Jeong Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeong Moon Information has no effect on the direction of Daejoo i.e., Daejoo and Jeong Moon go up and down completely randomly.
Pair Corralation between Daejoo and Jeong Moon
Assuming the 90 days trading horizon Daejoo Inc is expected to generate 1.03 times more return on investment than Jeong Moon. However, Daejoo is 1.03 times more volatile than Jeong Moon Information. It trades about 0.03 of its potential returns per unit of risk. Jeong Moon Information is currently generating about -0.1 per unit of risk. If you would invest 135,400 in Daejoo Inc on September 12, 2024 and sell it today you would earn a total of 3,500 from holding Daejoo Inc or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.31% |
| Values | Daily Returns |
Daejoo Inc vs. Jeong Moon Information
Performance |
| Timeline |
| Daejoo Inc |
| Jeong Moon Information |
Daejoo and Jeong Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo and Jeong Moon
The main advantage of trading using opposite Daejoo and Jeong Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo position performs unexpectedly, Jeong Moon 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 Jeong Moon will offset losses from the drop in Jeong Moon's long position.| Daejoo vs. Sejong Telecom | Daejoo vs. Korea Petro Chemical | Daejoo vs. Daishin Information Communications | Daejoo vs. Tae Kyung Chemical |
| Jeong Moon vs. Cube Entertainment | Jeong Moon vs. Dreamus Company | Jeong Moon vs. LG Energy Solution | Jeong Moon vs. Dongwon System |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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