Correlation Between Dongnam Chemical and Keyang Electric
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Keyang Electric 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 Dongnam Chemical and Keyang Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongnam Chemical Co and Keyang Electric Machinery, you can compare the effects of market volatilities on Dongnam Chemical and Keyang Electric 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 Dongnam Chemical with a short position of Keyang Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Keyang Electric.
Diversification Opportunities for Dongnam Chemical and Keyang Electric
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dongnam and Keyang is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Keyang Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyang Electric Machinery and Dongnam Chemical 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 Dongnam Chemical Co are associated (or correlated) with Keyang Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyang Electric Machinery has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Keyang Electric go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Keyang Electric
Assuming the 90 days trading horizon Dongnam Chemical is expected to generate 1.49 times less return on investment than Keyang Electric. But when comparing it to its historical volatility, Dongnam Chemical Co is 2.11 times less risky than Keyang Electric. It trades about 0.11 of its potential returns per unit of risk. Keyang Electric Machinery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 352,000 in Keyang Electric Machinery on November 8, 2024 and sell it today you would earn a total of 38,000 from holding Keyang Electric Machinery or generate 10.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Keyang Electric Machinery
Performance |
| Timeline |
| Dongnam Chemical |
| Keyang Electric Machinery |
Dongnam Chemical and Keyang Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Keyang Electric
The main advantage of trading using opposite Dongnam Chemical and Keyang Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Keyang Electric 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 Keyang Electric will offset losses from the drop in Keyang Electric's long position.| Dongnam Chemical vs. SEOWONINTECHCoLtd | Dongnam Chemical vs. Dongwoon Anatech Co | Dongnam Chemical vs. SS TECH | Dongnam Chemical vs. SK Chemicals Co |
| Keyang Electric vs. Choil Aluminum | Keyang Electric vs. Kbi Metal Co | Keyang Electric vs. Dongbang Ship Machinery | Keyang Electric vs. Kyeryong Construction Industrial |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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