Correlation Between System and Dongwoo Farm
Can any of the company-specific risk be diversified away by investing in both System 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 System and Dongwoo Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between System and Application and Dongwoo Farm To, you can compare the effects of market volatilities on System 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 System with a short position of Dongwoo Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and Dongwoo Farm.
Diversification Opportunities for System and Dongwoo Farm
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between System and Dongwoo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding System and Application 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 System 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 System and Application 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 System i.e., System and Dongwoo Farm go up and down completely randomly.
Pair Corralation between System and Dongwoo Farm
Assuming the 90 days trading horizon System and Application is expected to generate 2.0 times more return on investment than Dongwoo Farm. However, System is 2.0 times more volatile than Dongwoo Farm To. It trades about 0.08 of its potential returns per unit of risk. Dongwoo Farm To is currently generating about -0.18 per unit of risk. If you would invest 141,900 in System and Application on August 29, 2024 and sell it today you would earn a total of 5,500 from holding System and Application or generate 3.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
System and Application vs. Dongwoo Farm To
Performance |
| Timeline |
| System and Application |
| Dongwoo Farm To |
System and Dongwoo Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with System and Dongwoo Farm
The main advantage of trading using opposite System and Dongwoo Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if System 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.| System vs. Korea Real Estate | System vs. Korea Ratings Co | System vs. IQuest Co | System vs. Wonbang Tech Co |
| Dongwoo Farm vs. J Steel Co | Dongwoo Farm vs. Hanil Iron Steel | Dongwoo Farm vs. DAEDUCK ELECTRONICS CoLtd | Dongwoo Farm vs. Han Kook Steel |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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