Correlation Between Daejoo Electronic and Hanjin Transportation
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Hanjin Transportation 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 Daejoo Electronic and Hanjin Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejoo Electronic Materials and Hanjin Transportation Co, you can compare the effects of market volatilities on Daejoo Electronic and Hanjin Transportation 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 Daejoo Electronic with a short position of Hanjin Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Hanjin Transportation.
Diversification Opportunities for Daejoo Electronic and Hanjin Transportation
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daejoo and Hanjin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Hanjin Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanjin Transportation and Daejoo Electronic 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 Daejoo Electronic Materials are associated (or correlated) with Hanjin Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanjin Transportation has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Hanjin Transportation go up and down completely randomly.
Pair Corralation between Daejoo Electronic and Hanjin Transportation
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to generate 2.18 times more return on investment than Hanjin Transportation. However, Daejoo Electronic is 2.18 times more volatile than Hanjin Transportation Co. It trades about 0.02 of its potential returns per unit of risk. Hanjin Transportation Co is currently generating about 0.0 per unit of risk. If you would invest 7,740,774 in Daejoo Electronic Materials on September 26, 2024 and sell it today you would lose (20,774) from holding Daejoo Electronic Materials or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. Hanjin Transportation Co
Performance |
| Timeline |
| Daejoo Electronic |
| Hanjin Transportation |
Daejoo Electronic and Hanjin Transportation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and Hanjin Transportation
The main advantage of trading using opposite Daejoo Electronic and Hanjin Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, Hanjin Transportation 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 Hanjin Transportation will offset losses from the drop in Hanjin Transportation's long position.The idea behind Daejoo Electronic Materials and Hanjin Transportation Co 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.| Hanjin Transportation vs. Daejoo Electronic Materials | Hanjin Transportation vs. Union Materials Corp | Hanjin Transportation vs. Dongil Metal Co | Hanjin Transportation vs. PI Advanced Materials |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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