Correlation Between Shinsegae Engineering and Daou Technology
Can any of the company-specific risk be diversified away by investing in both Shinsegae Engineering and Daou Technology 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 Shinsegae Engineering and Daou Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shinsegae Engineering Construction and Daou Technology, you can compare the effects of market volatilities on Shinsegae Engineering and Daou Technology 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 Shinsegae Engineering with a short position of Daou Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinsegae Engineering and Daou Technology.
Diversification Opportunities for Shinsegae Engineering and Daou Technology
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Shinsegae and Daou is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Engineering Construc and Daou Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daou Technology and Shinsegae Engineering 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 Shinsegae Engineering Construction are associated (or correlated) with Daou Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daou Technology has no effect on the direction of Shinsegae Engineering i.e., Shinsegae Engineering and Daou Technology go up and down completely randomly.
Pair Corralation between Shinsegae Engineering and Daou Technology
Assuming the 90 days trading horizon Shinsegae Engineering Construction is expected to generate 0.05 times more return on investment than Daou Technology. However, Shinsegae Engineering Construction is 19.74 times less risky than Daou Technology. It trades about 0.26 of its potential returns per unit of risk. Daou Technology is currently generating about -0.03 per unit of risk. If you would invest 1,803,000 in Shinsegae Engineering Construction on October 30, 2024 and sell it today you would earn a total of 13,000 from holding Shinsegae Engineering Construction or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shinsegae Engineering Construc vs. Daou Technology
Performance |
| Timeline |
| Shinsegae Engineering |
| Daou Technology |
Shinsegae Engineering and Daou Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinsegae Engineering and Daou Technology
The main advantage of trading using opposite Shinsegae Engineering and Daou Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinsegae Engineering position performs unexpectedly, Daou Technology 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 Daou Technology will offset losses from the drop in Daou Technology's long position.The idea behind Shinsegae Engineering Construction and Daou Technology 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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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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