Correlation Between Daedong Metals and Hanyang ENG
Can any of the company-specific risk be diversified away by investing in both Daedong Metals and Hanyang ENG 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 Hanyang ENG 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 Hanyang ENG Co, you can compare the effects of market volatilities on Daedong Metals and Hanyang ENG 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 Hanyang ENG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daedong Metals and Hanyang ENG.
Diversification Opportunities for Daedong Metals and Hanyang ENG
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Daedong and Hanyang is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Metals Co and Hanyang ENG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanyang ENG 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 Hanyang ENG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanyang ENG has no effect on the direction of Daedong Metals i.e., Daedong Metals and Hanyang ENG go up and down completely randomly.
Pair Corralation between Daedong Metals and Hanyang ENG
Assuming the 90 days trading horizon Daedong Metals Co is expected to generate 5.21 times more return on investment than Hanyang ENG. However, Daedong Metals is 5.21 times more volatile than Hanyang ENG Co. It trades about 0.14 of its potential returns per unit of risk. Hanyang ENG Co is currently generating about -0.08 per unit of risk. If you would invest 616,000 in Daedong Metals Co on September 2, 2024 and sell it today you would earn a total of 126,000 from holding Daedong Metals Co or generate 20.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daedong Metals Co vs. Hanyang ENG Co
Performance |
| Timeline |
| Daedong Metals |
| Hanyang ENG |
Daedong Metals and Hanyang ENG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daedong Metals and Hanyang ENG
The main advantage of trading using opposite Daedong Metals and Hanyang ENG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daedong Metals position performs unexpectedly, Hanyang ENG 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 Hanyang ENG will offset losses from the drop in Hanyang ENG's long position.The idea behind Daedong Metals Co and Hanyang ENG Co 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.| Hanyang ENG vs. Sam Yang Foods | Hanyang ENG vs. Dongwon Metal Co | Hanyang ENG vs. Taeyang Metal Industrial | Hanyang ENG vs. Daedong Metals Co |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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