Correlation Between FOODWELL and Dongbang Ship

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Can any of the company-specific risk be diversified away by investing in both FOODWELL and Dongbang Ship 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 FOODWELL and Dongbang Ship into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FOODWELL Co and Dongbang Ship Machinery, you can compare the effects of market volatilities on FOODWELL and Dongbang Ship 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 FOODWELL with a short position of Dongbang Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of FOODWELL and Dongbang Ship.

Diversification Opportunities for FOODWELL and Dongbang Ship

FOODWELLDongbangDiversified AwayFOODWELLDongbangDiversified Away100%
0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between FOODWELL and Dongbang is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding FOODWELL Co and Dongbang Ship Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbang Ship Machinery and FOODWELL 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 FOODWELL Co are associated (or correlated) with Dongbang Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbang Ship Machinery has no effect on the direction of FOODWELL i.e., FOODWELL and Dongbang Ship go up and down completely randomly.

Pair Corralation between FOODWELL and Dongbang Ship

Assuming the 90 days trading horizon FOODWELL is expected to generate 1.68 times less return on investment than Dongbang Ship. But when comparing it to its historical volatility, FOODWELL Co is 1.49 times less risky than Dongbang Ship. It trades about 0.03 of its potential returns per unit of risk. Dongbang Ship Machinery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  259,000  in Dongbang Ship Machinery on November 19, 2024 and sell it today you would earn a total of  63,500  from holding Dongbang Ship Machinery or generate 24.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.79%
ValuesDaily Returns

FOODWELL Co  vs.  Dongbang Ship Machinery

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-5051015
JavaScript chart by amCharts 3.21.15005670 099410
       Timeline  
FOODWELL 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in FOODWELL Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FOODWELL sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb5,0005,5006,0006,500
Dongbang Ship Machinery 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongbang Ship may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2,6002,8003,0003,2003,400

FOODWELL and Dongbang Ship Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.23-5.42-3.6-1.790.01.933.895.857.81 0.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15005670 099410
       Returns  

Pair Trading with FOODWELL and Dongbang Ship

The main advantage of trading using opposite FOODWELL and Dongbang Ship positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FOODWELL position performs unexpectedly, Dongbang Ship 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 Dongbang Ship will offset losses from the drop in Dongbang Ship's long position.
The idea behind FOODWELL Co and Dongbang Ship Machinery 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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