Correlation Between Daejoo Electronic and POSCO M
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and POSCO M 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 POSCO M 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 POSCO M TECH Co, you can compare the effects of market volatilities on Daejoo Electronic and POSCO M 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 POSCO M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and POSCO M.
Diversification Opportunities for Daejoo Electronic and POSCO M
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daejoo and POSCO is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and POSCO M TECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO M TECH 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 POSCO M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO M TECH has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and POSCO M go up and down completely randomly.
Pair Corralation between Daejoo Electronic and POSCO M
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the POSCO M. In addition to that, Daejoo Electronic is 1.26 times more volatile than POSCO M TECH Co. It trades about -0.21 of its total potential returns per unit of risk. POSCO M TECH Co is currently generating about -0.19 per unit of volatility. If you would invest 1,575,000 in POSCO M TECH Co on August 25, 2024 and sell it today you would lose (184,000) from holding POSCO M TECH Co or give up 11.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. POSCO M TECH Co
Performance |
| Timeline |
| Daejoo Electronic |
| POSCO M TECH |
Daejoo Electronic and POSCO M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and POSCO M
The main advantage of trading using opposite Daejoo Electronic and POSCO M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, POSCO M 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 POSCO M will offset losses from the drop in POSCO M's long position.The idea behind Daejoo Electronic Materials and POSCO M TECH 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.| POSCO M vs. LG Chemicals | POSCO M vs. POSCO Holdings | POSCO M vs. Lotte Chemical Corp | POSCO M vs. Hyundai 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 CEOs Directory module to screen CEOs from public companies around the world.
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