Correlation Between Daewoo Engineering and Dongwoo Farm
Can any of the company-specific risk be diversified away by investing in both Daewoo Engineering and Dongwoo Farm 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 Daewoo Engineering and Dongwoo Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewoo Engineering Construction and Dongwoo Farm To, you can compare the effects of market volatilities on Daewoo Engineering and Dongwoo Farm 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 Daewoo Engineering with a short position of Dongwoo Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo Engineering and Dongwoo Farm.
Diversification Opportunities for Daewoo Engineering and Dongwoo Farm
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daewoo and Dongwoo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Engineering Constructio and Dongwoo Farm To in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoo Farm To and Daewoo 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 Daewoo Engineering Construction are associated (or correlated) with Dongwoo Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoo Farm To has no effect on the direction of Daewoo Engineering i.e., Daewoo Engineering and Dongwoo Farm go up and down completely randomly.
Pair Corralation between Daewoo Engineering and Dongwoo Farm
Assuming the 90 days trading horizon Daewoo Engineering Construction is expected to generate 1.73 times more return on investment than Dongwoo Farm. However, Daewoo Engineering is 1.73 times more volatile than Dongwoo Farm To. It trades about 0.1 of its potential returns per unit of risk. Dongwoo Farm To is currently generating about -0.17 per unit of risk. If you would invest 353,500 in Daewoo Engineering Construction on September 1, 2024 and sell it today you would earn a total of 15,500 from holding Daewoo Engineering Construction or generate 4.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daewoo Engineering Constructio vs. Dongwoo Farm To
Performance |
| Timeline |
| Daewoo Engineering |
| Dongwoo Farm To |
Daewoo Engineering and Dongwoo Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewoo Engineering and Dongwoo Farm
The main advantage of trading using opposite Daewoo Engineering and Dongwoo Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewoo Engineering position performs unexpectedly, Dongwoo Farm 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 Dongwoo Farm will offset losses from the drop in Dongwoo Farm's long position.| Daewoo Engineering vs. Korea New Network | Daewoo Engineering vs. ICD Co | Daewoo Engineering vs. DYPNF CoLtd | Daewoo Engineering vs. Busan Industrial Co |
| Dongwoo Farm vs. Maeil Dairies Co | Dongwoo Farm vs. Busan Industrial Co | Dongwoo Farm vs. Busan Ind | Dongwoo Farm vs. Mirae Asset Daewoo |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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