Correlation Between Iljin Materials and Daiyang Metal
Can any of the company-specific risk be diversified away by investing in both Iljin Materials and Daiyang Metal 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 Iljin Materials and Daiyang Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iljin Materials Co and Daiyang Metal Co, you can compare the effects of market volatilities on Iljin Materials and Daiyang Metal 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 Iljin Materials with a short position of Daiyang Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iljin Materials and Daiyang Metal.
Diversification Opportunities for Iljin Materials and Daiyang Metal
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Iljin and Daiyang is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Iljin Materials Co and Daiyang Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiyang Metal and Iljin Materials 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 Iljin Materials Co are associated (or correlated) with Daiyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiyang Metal has no effect on the direction of Iljin Materials i.e., Iljin Materials and Daiyang Metal go up and down completely randomly.
Pair Corralation between Iljin Materials and Daiyang Metal
Assuming the 90 days trading horizon Iljin Materials Co is expected to under-perform the Daiyang Metal. But the stock apears to be less risky and, when comparing its historical volatility, Iljin Materials Co is 1.17 times less risky than Daiyang Metal. The stock trades about -0.68 of its potential returns per unit of risk. The Daiyang Metal Co is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest 171,900 in Daiyang Metal Co on August 29, 2024 and sell it today you would lose (22,500) from holding Daiyang Metal Co or give up 13.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iljin Materials Co vs. Daiyang Metal Co
Performance |
| Timeline |
| Iljin Materials |
| Daiyang Metal |
Iljin Materials and Daiyang Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iljin Materials and Daiyang Metal
The main advantage of trading using opposite Iljin Materials and Daiyang Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iljin Materials position performs unexpectedly, Daiyang Metal 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 Daiyang Metal will offset losses from the drop in Daiyang Metal's long position.| Iljin Materials vs. Samsung Electronics Co | Iljin Materials vs. Samsung Electronics Co | Iljin Materials vs. LG Energy Solution | Iljin Materials vs. SK Hynix |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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