Correlation Between Dongnam Chemical and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Homecast CoLtd 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 Homecast CoLtd 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 Homecast CoLtd, you can compare the effects of market volatilities on Dongnam Chemical and Homecast CoLtd 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 Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Homecast CoLtd.
Diversification Opportunities for Dongnam Chemical and Homecast CoLtd
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongnam and Homecast is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd 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 Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Homecast CoLtd
Assuming the 90 days trading horizon Dongnam Chemical Co is expected to generate 0.61 times more return on investment than Homecast CoLtd. However, Dongnam Chemical Co is 1.63 times less risky than Homecast CoLtd. It trades about 0.1 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.14 per unit of risk. If you would invest 3,045,000 in Dongnam Chemical Co on September 24, 2024 and sell it today you would earn a total of 110,000 from holding Dongnam Chemical Co or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Homecast CoLtd
Performance |
| Timeline |
| Dongnam Chemical |
| Homecast CoLtd |
Dongnam Chemical and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Homecast CoLtd
The main advantage of trading using opposite Dongnam Chemical and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.| Dongnam Chemical vs. AptaBio Therapeutics | Dongnam Chemical vs. Wonbang Tech Co | Dongnam Chemical vs. Busan Industrial Co | Dongnam Chemical vs. Busan Ind |
| Homecast CoLtd vs. Hansol Chemical Co | Homecast CoLtd vs. Shinhan Financial Group | Homecast CoLtd vs. Dongnam Chemical Co | Homecast CoLtd vs. Kukdo Chemical 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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