Correlation Between Daejoo Electronic and Namhae Chemical
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Namhae 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 Namhae 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 Namhae Chemical, you can compare the effects of market volatilities on Daejoo Electronic and Namhae 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 Namhae Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Namhae Chemical.
Diversification Opportunities for Daejoo Electronic and Namhae Chemical
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Daejoo and Namhae is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Namhae Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namhae 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 Namhae Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namhae Chemical has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Namhae Chemical go up and down completely randomly.
Pair Corralation between Daejoo Electronic and Namhae Chemical
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to generate 7.34 times more return on investment than Namhae Chemical. However, Daejoo Electronic is 7.34 times more volatile than Namhae Chemical. It trades about 0.28 of its potential returns per unit of risk. Namhae Chemical is currently generating about 0.07 per unit of risk. If you would invest 8,100,000 in Daejoo Electronic Materials on November 7, 2024 and sell it today you would earn a total of 2,150,000 from holding Daejoo Electronic Materials or generate 26.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 89.47% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. Namhae Chemical
Performance |
| Timeline |
| Daejoo Electronic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Namhae Chemical |
Daejoo Electronic and Namhae Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and Namhae Chemical
The main advantage of trading using opposite Daejoo Electronic and Namhae Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, Namhae 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 Namhae Chemical will offset losses from the drop in Namhae Chemical's long position.The idea behind Daejoo Electronic Materials and Namhae Chemical 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.| Namhae Chemical vs. Neungyule Education | Namhae Chemical vs. Asia Technology Co | Namhae Chemical vs. NewFlex Technology Co | Namhae Chemical vs. Eagle Veterinary Technology |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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