Correlation Between Daedong Gear and CBI
Can any of the company-specific risk be diversified away by investing in both Daedong Gear and CBI 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 Daedong Gear and CBI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daedong Gear Co and CBI Co, you can compare the effects of market volatilities on Daedong Gear and CBI 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 Daedong Gear with a short position of CBI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daedong Gear and CBI.
Diversification Opportunities for Daedong Gear and CBI
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daedong and CBI is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Gear Co and CBI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBI Co and Daedong Gear 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 Daedong Gear Co are associated (or correlated) with CBI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBI Co has no effect on the direction of Daedong Gear i.e., Daedong Gear and CBI go up and down completely randomly.
Pair Corralation between Daedong Gear and CBI
Assuming the 90 days trading horizon Daedong Gear Co is expected to generate 4.65 times more return on investment than CBI. However, Daedong Gear is 4.65 times more volatile than CBI Co. It trades about 0.31 of its potential returns per unit of risk. CBI Co is currently generating about -0.49 per unit of risk. If you would invest 744,000 in Daedong Gear Co on August 28, 2024 and sell it today you would earn a total of 413,000 from holding Daedong Gear Co or generate 55.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daedong Gear Co vs. CBI Co
Performance |
| Timeline |
| Daedong Gear |
| CBI Co |
Daedong Gear and CBI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daedong Gear and CBI
The main advantage of trading using opposite Daedong Gear and CBI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daedong Gear position performs unexpectedly, CBI 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 CBI will offset losses from the drop in CBI's long position.| Daedong Gear vs. A Tech Solution Co | Daedong Gear vs. Hanjin Transportation Co | Daedong Gear vs. Sungchang Autotech Co | Daedong Gear vs. SS TECH |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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