Correlation Between ABCO Electronics and Daekyung Machinery
Can any of the company-specific risk be diversified away by investing in both ABCO Electronics and Daekyung Machinery 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 ABCO Electronics and Daekyung Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABCO Electronics Co and Daekyung Machinery Engineering, you can compare the effects of market volatilities on ABCO Electronics and Daekyung Machinery 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 ABCO Electronics with a short position of Daekyung Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABCO Electronics and Daekyung Machinery.
Diversification Opportunities for ABCO Electronics and Daekyung Machinery
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ABCO and Daekyung is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and Daekyung Machinery Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daekyung Machinery and ABCO Electronics 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 ABCO Electronics Co are associated (or correlated) with Daekyung Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daekyung Machinery has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and Daekyung Machinery go up and down completely randomly.
Pair Corralation between ABCO Electronics and Daekyung Machinery
Assuming the 90 days trading horizon ABCO Electronics Co is expected to under-perform the Daekyung Machinery. But the stock apears to be less risky and, when comparing its historical volatility, ABCO Electronics Co is 1.39 times less risky than Daekyung Machinery. The stock trades about -0.04 of its potential returns per unit of risk. The Daekyung Machinery Engineering is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 35,700 in Daekyung Machinery Engineering on August 31, 2024 and sell it today you would earn a total of 15,800 from holding Daekyung Machinery Engineering or generate 44.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
ABCO Electronics Co vs. Daekyung Machinery Engineering
Performance |
| Timeline |
| ABCO Electronics |
| Daekyung Machinery |
ABCO Electronics and Daekyung Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABCO Electronics and Daekyung Machinery
The main advantage of trading using opposite ABCO Electronics and Daekyung Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABCO Electronics position performs unexpectedly, Daekyung Machinery 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 Daekyung Machinery will offset losses from the drop in Daekyung Machinery's long position.| ABCO Electronics vs. Dongsin Engineering Construction | ABCO Electronics vs. Doosan Fuel Cell | ABCO Electronics vs. Daishin Balance 1 | ABCO Electronics vs. Total Soft Bank |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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