Correlation Between Daewon Chemical and ABCO Electronics
Can any of the company-specific risk be diversified away by investing in both Daewon Chemical and ABCO Electronics 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 Daewon Chemical and ABCO Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewon Chemical Co and ABCO Electronics Co, you can compare the effects of market volatilities on Daewon Chemical and ABCO Electronics 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 Daewon Chemical with a short position of ABCO Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewon Chemical and ABCO Electronics.
Diversification Opportunities for Daewon Chemical and ABCO Electronics
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Daewon and ABCO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Daewon Chemical Co and ABCO Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABCO Electronics and Daewon 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 Daewon Chemical Co are associated (or correlated) with ABCO Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABCO Electronics has no effect on the direction of Daewon Chemical i.e., Daewon Chemical and ABCO Electronics go up and down completely randomly.
Pair Corralation between Daewon Chemical and ABCO Electronics
Assuming the 90 days trading horizon Daewon Chemical is expected to generate 7.94 times less return on investment than ABCO Electronics. But when comparing it to its historical volatility, Daewon Chemical Co is 3.48 times less risky than ABCO Electronics. It trades about 0.16 of its potential returns per unit of risk. ABCO Electronics Co is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 450,500 in ABCO Electronics Co on October 21, 2024 and sell it today you would earn a total of 83,500 from holding ABCO Electronics Co or generate 18.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daewon Chemical Co vs. ABCO Electronics Co
Performance |
| Timeline |
| Daewon Chemical |
| ABCO Electronics |
Daewon Chemical and ABCO Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewon Chemical and ABCO Electronics
The main advantage of trading using opposite Daewon Chemical and ABCO Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewon Chemical position performs unexpectedly, ABCO Electronics 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 ABCO Electronics will offset losses from the drop in ABCO Electronics' long position.| Daewon Chemical vs. Daechang Steel Co | Daewon Chemical vs. Handok Clean Tech | Daewon Chemical vs. Han Kook Steel | Daewon Chemical vs. LG Household Healthcare |
| ABCO Electronics vs. ChipsMedia | ABCO Electronics vs. SK Chemicals Co | ABCO Electronics vs. Tamul Multimedia Co | ABCO Electronics vs. Daewon Media 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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