Correlation Between Daejoo Electronic and Automobile
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Automobile 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 Automobile 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 Automobile Pc, you can compare the effects of market volatilities on Daejoo Electronic and Automobile 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 Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Automobile.
Diversification Opportunities for Daejoo Electronic and Automobile
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daejoo and Automobile is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Automobile Pc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automobile Pc 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 Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automobile Pc has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Automobile go up and down completely randomly.
Pair Corralation between Daejoo Electronic and Automobile
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the Automobile. In addition to that, Daejoo Electronic is 1.03 times more volatile than Automobile Pc. It trades about -0.15 of its total potential returns per unit of risk. Automobile Pc is currently generating about -0.04 per unit of volatility. If you would invest 73,300 in Automobile Pc on August 27, 2024 and sell it today you would lose (5,900) from holding Automobile Pc or give up 8.05% 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. Automobile Pc
Performance |
| Timeline |
| Daejoo Electronic |
| Automobile Pc |
Daejoo Electronic and Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and Automobile
The main advantage of trading using opposite Daejoo Electronic and Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, Automobile 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 Automobile will offset losses from the drop in Automobile's long position.The idea behind Daejoo Electronic Materials and Automobile Pc 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.| Automobile vs. Busan Industrial Co | Automobile vs. Busan Ind | Automobile vs. Mirae Asset Daewoo | Automobile vs. UNISEM Co |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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