Correlation Between Dongnam Chemical and Tway Air
Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Tway Air 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 Tway Air 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 Tway Air Co, you can compare the effects of market volatilities on Dongnam Chemical and Tway Air 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 Tway Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Tway Air.
Diversification Opportunities for Dongnam Chemical and Tway Air
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dongnam and Tway is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Tway Air Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tway Air 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 Tway Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tway Air has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Tway Air go up and down completely randomly.
Pair Corralation between Dongnam Chemical and Tway Air
Assuming the 90 days trading horizon Dongnam Chemical is expected to generate 1.05 times less return on investment than Tway Air. But when comparing it to its historical volatility, Dongnam Chemical Co is 2.52 times less risky than Tway Air. It trades about 0.48 of its potential returns per unit of risk. Tway Air Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 261,000 in Tway Air Co on October 18, 2024 and sell it today you would earn a total of 26,500 from holding Tway Air Co or generate 10.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongnam Chemical Co vs. Tway Air Co
Performance |
| Timeline |
| Dongnam Chemical |
| Tway Air |
Dongnam Chemical and Tway Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongnam Chemical and Tway Air
The main advantage of trading using opposite Dongnam Chemical and Tway Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongnam Chemical position performs unexpectedly, Tway Air 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 Tway Air will offset losses from the drop in Tway Air's long position.| Dongnam Chemical vs. Eagle Veterinary Technology | Dongnam Chemical vs. Orbitech Co | Dongnam Chemical vs. Hanwha Chemical Corp | Dongnam Chemical vs. Raontech |
| Tway Air vs. LG Chemicals | Tway Air vs. KPX Green Chemical | Tway Air vs. Dongnam Chemical Co | Tway Air vs. Kukdong Oil Chemicals |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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