Correlation Between Automobile and Dong A
Can any of the company-specific risk be diversified away by investing in both Automobile and Dong A 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 Automobile and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automobile Pc and Dong A Eltek, you can compare the effects of market volatilities on Automobile and Dong A 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 Automobile with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and Dong A.
Diversification Opportunities for Automobile and Dong A
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Automobile and Dong is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek and Automobile 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 Automobile Pc are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Automobile i.e., Automobile and Dong A go up and down completely randomly.
Pair Corralation between Automobile and Dong A
Assuming the 90 days trading horizon Automobile Pc is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, Automobile Pc is 1.11 times less risky than Dong A. The stock trades about -0.09 of its potential returns per unit of risk. The Dong A Eltek is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 447,068 in Dong A Eltek on December 4, 2024 and sell it today you would lose (120,568) from holding Dong A Eltek or give up 26.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automobile Pc vs. Dong A Eltek
Performance |
| Timeline |
| Automobile Pc |
| Dong A Eltek |
Automobile and Dong A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automobile and Dong A
The main advantage of trading using opposite Automobile and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile position performs unexpectedly, Dong A 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 Dong A will offset losses from the drop in Dong A's long position.| Automobile vs. Sangsin Energy Display | ||
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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