Correlation Between DIGITAL CHOSUN and Pyung Hwa

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Can any of the company-specific risk be diversified away by investing in both DIGITAL CHOSUN and Pyung Hwa 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 DIGITAL CHOSUN and Pyung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIGITAL CHOSUN and Pyung Hwa Industrial, you can compare the effects of market volatilities on DIGITAL CHOSUN and Pyung Hwa 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 DIGITAL CHOSUN with a short position of Pyung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIGITAL CHOSUN and Pyung Hwa.

Diversification Opportunities for DIGITAL CHOSUN and Pyung Hwa

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between DIGITAL and Pyung is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding DIGITAL CHOSUN and Pyung Hwa Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyung Hwa Industrial and DIGITAL CHOSUN 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 DIGITAL CHOSUN are associated (or correlated) with Pyung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyung Hwa Industrial has no effect on the direction of DIGITAL CHOSUN i.e., DIGITAL CHOSUN and Pyung Hwa go up and down completely randomly.

Pair Corralation between DIGITAL CHOSUN and Pyung Hwa

Assuming the 90 days trading horizon DIGITAL CHOSUN is expected to under-perform the Pyung Hwa. But the stock apears to be less risky and, when comparing its historical volatility, DIGITAL CHOSUN is 1.12 times less risky than Pyung Hwa. The stock trades about -0.03 of its potential returns per unit of risk. The Pyung Hwa Industrial is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  125,100  in Pyung Hwa Industrial on October 13, 2024 and sell it today you would lose (25,200) from holding Pyung Hwa Industrial or give up 20.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

DIGITAL CHOSUN  vs.  Pyung Hwa Industrial

 Performance 
       Timeline  
DIGITAL CHOSUN 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in DIGITAL CHOSUN are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DIGITAL CHOSUN may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Pyung Hwa Industrial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Pyung Hwa Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Pyung Hwa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DIGITAL CHOSUN and Pyung Hwa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DIGITAL CHOSUN and Pyung Hwa

The main advantage of trading using opposite DIGITAL CHOSUN and Pyung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIGITAL CHOSUN position performs unexpectedly, Pyung Hwa 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 Pyung Hwa will offset losses from the drop in Pyung Hwa's long position.
The idea behind DIGITAL CHOSUN and Pyung Hwa Industrial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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