Correlation Between Daejoo Electronic and Daewon Chemical
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Daewon Chemical 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 Daewon Chemical 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 Daewon Chemical Co, you can compare the effects of market volatilities on Daejoo Electronic and Daewon Chemical 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 Daewon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Daewon Chemical.
Diversification Opportunities for Daejoo Electronic and Daewon Chemical
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daejoo and Daewon is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Daewon Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon Chemical 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 Daewon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewon Chemical has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Daewon Chemical go up and down completely randomly.
Pair Corralation between Daejoo Electronic and Daewon Chemical
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the Daewon Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Daejoo Electronic Materials is 2.48 times less risky than Daewon Chemical. The stock trades about -0.36 of its potential returns per unit of risk. The Daewon Chemical Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 106,500 in Daewon Chemical Co on September 3, 2024 and sell it today you would earn a total of 8,700 from holding Daewon Chemical Co or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. Daewon Chemical Co
Performance |
| Timeline |
| Daejoo Electronic |
| Daewon Chemical |
Daejoo Electronic and Daewon Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and Daewon Chemical
The main advantage of trading using opposite Daejoo Electronic and Daewon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, Daewon Chemical 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 Daewon Chemical will offset losses from the drop in Daewon Chemical's long position.The idea behind Daejoo Electronic Materials and Daewon Chemical 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.| Daewon Chemical vs. Daejoo Electronic Materials | Daewon Chemical vs. Phoenix Materials Co | Daewon Chemical vs. INNOX Advanced Materials | Daewon Chemical vs. Lotte Energy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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