Correlation Between Oriental Precision and Kwang Jin

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

Diversification Opportunities for Oriental Precision and Kwang Jin

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Oriental and Kwang is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Precision Engineering and Kwang Jin Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kwang Jin Ind and Oriental Precision 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 Oriental Precision Engineering are associated (or correlated) with Kwang Jin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kwang Jin Ind has no effect on the direction of Oriental Precision i.e., Oriental Precision and Kwang Jin go up and down completely randomly.

Pair Corralation between Oriental Precision and Kwang Jin

Assuming the 90 days trading horizon Oriental Precision Engineering is expected to generate 2.53 times more return on investment than Kwang Jin. However, Oriental Precision is 2.53 times more volatile than Kwang Jin Ind. It trades about 0.13 of its potential returns per unit of risk. Kwang Jin Ind is currently generating about 0.11 per unit of risk. If you would invest  473,000  in Oriental Precision Engineering on September 22, 2024 and sell it today you would earn a total of  53,000  from holding Oriental Precision Engineering or generate 11.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Oriental Precision Engineering  vs.  Kwang Jin Ind

 Performance 
       Timeline  
Oriental Precision 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Precision Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oriental Precision sustained solid returns over the last few months and may actually be approaching a breakup point.
Kwang Jin Ind 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kwang Jin Ind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Oriental Precision and Kwang Jin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Oriental Precision and Kwang Jin

The main advantage of trading using opposite Oriental Precision and Kwang Jin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental Precision position performs unexpectedly, Kwang Jin 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 Kwang Jin will offset losses from the drop in Kwang Jin's long position.
The idea behind Oriental Precision Engineering and Kwang Jin Ind 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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