Correlation Between COWAY and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both COWAY and Daewoo Engineering 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 COWAY and Daewoo Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COWAY Co and Daewoo Engineering Construction, you can compare the effects of market volatilities on COWAY and Daewoo Engineering 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 COWAY with a short position of Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of COWAY and Daewoo Engineering.
Diversification Opportunities for COWAY and Daewoo Engineering
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between COWAY and Daewoo is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding COWAY Co and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering and COWAY 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 COWAY Co are associated (or correlated) with Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of COWAY i.e., COWAY and Daewoo Engineering go up and down completely randomly.
Pair Corralation between COWAY and Daewoo Engineering
Assuming the 90 days trading horizon COWAY Co is expected to generate 1.96 times more return on investment than Daewoo Engineering. However, COWAY is 1.96 times more volatile than Daewoo Engineering Construction. It trades about 0.28 of its potential returns per unit of risk. Daewoo Engineering Construction is currently generating about -0.21 per unit of risk. If you would invest 6,780,000 in COWAY Co on October 23, 2024 and sell it today you would earn a total of 1,050,000 from holding COWAY Co or generate 15.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
COWAY Co vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| COWAY |
| Daewoo Engineering |
COWAY and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COWAY and Daewoo Engineering
The main advantage of trading using opposite COWAY and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COWAY position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.| COWAY vs. Hanjin Transportation Co | COWAY vs. Grand Korea Leisure | COWAY vs. Vissem Electronics Co | COWAY vs. iNtRON Biotechnology |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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