Correlation Between Dongwon System and UIL
Can any of the company-specific risk be diversified away by investing in both Dongwon System and UIL 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 Dongwon System and UIL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwon System and UIL Co, you can compare the effects of market volatilities on Dongwon System and UIL 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 Dongwon System with a short position of UIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon System and UIL.
Diversification Opportunities for Dongwon System and UIL
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dongwon and UIL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and UIL Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UIL Co and Dongwon System 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 Dongwon System are associated (or correlated) with UIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UIL Co has no effect on the direction of Dongwon System i.e., Dongwon System and UIL go up and down completely randomly.
Pair Corralation between Dongwon System and UIL
Assuming the 90 days trading horizon Dongwon System is expected to generate 2.18 times less return on investment than UIL. But when comparing it to its historical volatility, Dongwon System is 1.08 times less risky than UIL. It trades about 0.02 of its potential returns per unit of risk. UIL Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 362,000 in UIL Co on September 14, 2024 and sell it today you would earn a total of 148,000 from holding UIL Co or generate 40.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Dongwon System vs. UIL Co
Performance |
| Timeline |
| Dongwon System |
| UIL Co |
Dongwon System and UIL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwon System and UIL
The main advantage of trading using opposite Dongwon System and UIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon System position performs unexpectedly, UIL 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 UIL will offset losses from the drop in UIL's long position.| Dongwon System vs. DSC Investment | Dongwon System vs. Jeju Air Co | Dongwon System vs. Woori Technology Investment | Dongwon System vs. CU Medical Systems |
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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