Correlation Between Geumhwa Plant and DongWon Development
Can any of the company-specific risk be diversified away by investing in both Geumhwa Plant and DongWon Development 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 Geumhwa Plant and DongWon Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geumhwa Plant Service and DongWon Development CoLtd, you can compare the effects of market volatilities on Geumhwa Plant and DongWon Development 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 Geumhwa Plant with a short position of DongWon Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geumhwa Plant and DongWon Development.
Diversification Opportunities for Geumhwa Plant and DongWon Development
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Geumhwa and DongWon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Geumhwa Plant Service and DongWon Development CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DongWon Development CoLtd and Geumhwa Plant 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 Geumhwa Plant Service are associated (or correlated) with DongWon Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DongWon Development CoLtd has no effect on the direction of Geumhwa Plant i.e., Geumhwa Plant and DongWon Development go up and down completely randomly.
Pair Corralation between Geumhwa Plant and DongWon Development
Assuming the 90 days trading horizon Geumhwa Plant Service is expected to under-perform the DongWon Development. In addition to that, Geumhwa Plant is 1.16 times more volatile than DongWon Development CoLtd. It trades about -0.28 of its total potential returns per unit of risk. DongWon Development CoLtd is currently generating about -0.32 per unit of volatility. If you would invest 254,000 in DongWon Development CoLtd on September 1, 2024 and sell it today you would lose (20,000) from holding DongWon Development CoLtd or give up 7.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Geumhwa Plant Service vs. DongWon Development CoLtd
Performance |
| Timeline |
| Geumhwa Plant Service |
| DongWon Development CoLtd |
Geumhwa Plant and DongWon Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geumhwa Plant and DongWon Development
The main advantage of trading using opposite Geumhwa Plant and DongWon Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geumhwa Plant position performs unexpectedly, DongWon Development 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 DongWon Development will offset losses from the drop in DongWon Development's long position.| Geumhwa Plant vs. Korea New Network | Geumhwa Plant vs. ICD Co | Geumhwa Plant vs. DYPNF CoLtd | Geumhwa Plant vs. Busan Industrial Co |
| DongWon Development vs. Busan Industrial Co | DongWon Development vs. Busan Ind | DongWon Development vs. Mirae Asset Daewoo | DongWon Development vs. Finebesteel |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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