Correlation Between Dongwon System and LF Co
Can any of the company-specific risk be diversified away by investing in both Dongwon System and LF Co 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 LF Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwon System and LF Co, you can compare the effects of market volatilities on Dongwon System and LF Co 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 LF Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon System and LF Co.
Diversification Opportunities for Dongwon System and LF Co
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongwon and 066970 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and LF Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LF 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 LF Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LF Co has no effect on the direction of Dongwon System i.e., Dongwon System and LF Co go up and down completely randomly.
Pair Corralation between Dongwon System and LF Co
Assuming the 90 days trading horizon Dongwon System is expected to generate 0.82 times more return on investment than LF Co. However, Dongwon System is 1.21 times less risky than LF Co. It trades about 0.05 of its potential returns per unit of risk. LF Co is currently generating about -0.04 per unit of risk. If you would invest 3,403,378 in Dongwon System on September 14, 2024 and sell it today you would earn a total of 906,622 from holding Dongwon System or generate 26.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwon System vs. LF Co
Performance |
| Timeline |
| Dongwon System |
| LF Co |
Dongwon System and LF Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwon System and LF Co
The main advantage of trading using opposite Dongwon System and LF Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon System position performs unexpectedly, LF Co 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 LF Co will offset losses from the drop in LF Co'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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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