Correlation Between Daedong Metals and Jeju Bank
Can any of the company-specific risk be diversified away by investing in both Daedong Metals and Jeju Bank 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 Daedong Metals and Jeju Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daedong Metals Co and Jeju Bank, you can compare the effects of market volatilities on Daedong Metals and Jeju Bank 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 Daedong Metals with a short position of Jeju Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daedong Metals and Jeju Bank.
Diversification Opportunities for Daedong Metals and Jeju Bank
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Daedong and Jeju is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Metals Co and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank and Daedong Metals 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 Daedong Metals Co are associated (or correlated) with Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of Daedong Metals i.e., Daedong Metals and Jeju Bank go up and down completely randomly.
Pair Corralation between Daedong Metals and Jeju Bank
Assuming the 90 days trading horizon Daedong Metals is expected to generate 8.53 times less return on investment than Jeju Bank. But when comparing it to its historical volatility, Daedong Metals Co is 1.43 times less risky than Jeju Bank. It trades about 0.0 of its potential returns per unit of risk. Jeju Bank is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 872,015 in Jeju Bank on September 3, 2024 and sell it today you would lose (79,015) from holding Jeju Bank or give up 9.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daedong Metals Co vs. Jeju Bank
Performance |
| Timeline |
| Daedong Metals |
| Jeju Bank |
Daedong Metals and Jeju Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daedong Metals and Jeju Bank
The main advantage of trading using opposite Daedong Metals and Jeju Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daedong Metals position performs unexpectedly, Jeju Bank 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 Jeju Bank will offset losses from the drop in Jeju Bank's long position.| Daedong Metals vs. Ecocab Co | Daedong Metals vs. Daedong Gear Co | Daedong Metals vs. Hwashin Precision Engineering | Daedong Metals vs. YOUNGHWA TECH Co |
| Jeju Bank vs. AptaBio Therapeutics | Jeju Bank vs. Daewoo SBI SPAC | Jeju Bank vs. Dream Security co | Jeju Bank vs. Microfriend |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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