Correlation Between Korea New and Daejoo Electronic
Can any of the company-specific risk be diversified away by investing in both Korea New 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 Korea New and Daejoo Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea New Network and Daejoo Electronic Materials, you can compare the effects of market volatilities on Korea New 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 Korea New with a short position of Daejoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea New and Daejoo Electronic.
Diversification Opportunities for Korea New and Daejoo Electronic
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Korea and Daejoo is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Korea New Network and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic and Korea New 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 Korea New Network 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 Korea New i.e., Korea New and Daejoo Electronic go up and down completely randomly.
Pair Corralation between Korea New and Daejoo Electronic
Assuming the 90 days trading horizon Korea New Network is expected to under-perform the Daejoo Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Korea New Network is 1.77 times less risky than Daejoo Electronic. The stock trades about 0.0 of its potential returns per unit of risk. The Daejoo Electronic Materials is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 7,839,784 in Daejoo Electronic Materials on September 3, 2024 and sell it today you would earn a total of 470,216 from holding Daejoo Electronic Materials or generate 6.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea New Network vs. Daejoo Electronic Materials
Performance |
| Timeline |
| Korea New Network |
| Daejoo Electronic |
Korea New and Daejoo Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea New and Daejoo Electronic
The main advantage of trading using opposite Korea New and Daejoo Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea New 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.| Korea New vs. Daejoo Electronic Materials | Korea New vs. Lake Materials Co | Korea New vs. Lotte Energy Materials | Korea New vs. EV Advanced Material |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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