Correlation Between Daewoo Engineering and Lindeman Asia
Can any of the company-specific risk be diversified away by investing in both Daewoo Engineering and Lindeman Asia 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 Lindeman Asia 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 Lindeman Asia Investment, you can compare the effects of market volatilities on Daewoo Engineering and Lindeman Asia 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 Lindeman Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo Engineering and Lindeman Asia.
Diversification Opportunities for Daewoo Engineering and Lindeman Asia
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daewoo and Lindeman is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Engineering Constructio and Lindeman Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindeman Asia Investment 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 Lindeman Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindeman Asia Investment has no effect on the direction of Daewoo Engineering i.e., Daewoo Engineering and Lindeman Asia go up and down completely randomly.
Pair Corralation between Daewoo Engineering and Lindeman Asia
Assuming the 90 days trading horizon Daewoo Engineering Construction is expected to generate 0.68 times more return on investment than Lindeman Asia. However, Daewoo Engineering Construction is 1.47 times less risky than Lindeman Asia. It trades about 0.1 of its potential returns per unit of risk. Lindeman Asia Investment is currently generating about -0.12 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. Lindeman Asia Investment
Performance |
| Timeline |
| Daewoo Engineering |
| Lindeman Asia Investment |
Daewoo Engineering and Lindeman Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewoo Engineering and Lindeman Asia
The main advantage of trading using opposite Daewoo Engineering and Lindeman Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewoo Engineering position performs unexpectedly, Lindeman Asia 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 Lindeman Asia will offset losses from the drop in Lindeman Asia'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 |
| Lindeman Asia vs. Hanwha InvestmentSecurities Co | Lindeman Asia vs. Solution Advanced Technology | Lindeman Asia vs. Busan Industrial Co | Lindeman Asia vs. Busan Ind |
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 CEOs Directory module to screen CEOs from public companies around the world.
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