Correlation Between Interflex and Daejoo Electronic
Can any of the company-specific risk be diversified away by investing in both Interflex and Daejoo Electronic 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 Interflex and Daejoo Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Interflex Co and Daejoo Electronic Materials, you can compare the effects of market volatilities on Interflex and Daejoo Electronic 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 Interflex with a short position of Daejoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interflex and Daejoo Electronic.
Diversification Opportunities for Interflex and Daejoo Electronic
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Interflex and Daejoo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Interflex Co and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic and Interflex 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 Interflex Co are associated (or correlated) with Daejoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Electronic has no effect on the direction of Interflex i.e., Interflex and Daejoo Electronic go up and down completely randomly.
Pair Corralation between Interflex and Daejoo Electronic
Assuming the 90 days trading horizon Interflex Co is expected to under-perform the Daejoo Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Interflex Co is 1.42 times less risky than Daejoo Electronic. The stock trades about -0.14 of its potential returns per unit of risk. The Daejoo Electronic Materials is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 11,780,000 in Daejoo Electronic Materials on August 31, 2024 and sell it today you would lose (3,470,000) from holding Daejoo Electronic Materials or give up 29.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Interflex Co vs. Daejoo Electronic Materials
Performance |
| Timeline |
| Interflex |
| Daejoo Electronic |
Interflex and Daejoo Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Interflex and Daejoo Electronic
The main advantage of trading using opposite Interflex and Daejoo Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Interflex position performs unexpectedly, Daejoo Electronic 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 Daejoo Electronic will offset losses from the drop in Daejoo Electronic's long position.The idea behind Interflex Co and Daejoo Electronic Materials 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.| Daejoo Electronic vs. Dongsin Engineering Construction | Daejoo Electronic vs. Doosan Fuel Cell | Daejoo Electronic vs. Daishin Balance 1 | Daejoo Electronic vs. Total Soft Bank |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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