Correlation Between Daejoo Electronic and Kmw
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Kmw 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 Kmw 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 Kmw Inc, you can compare the effects of market volatilities on Daejoo Electronic and Kmw 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 Kmw. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Kmw.
Diversification Opportunities for Daejoo Electronic and Kmw
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Daejoo and Kmw is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Kmw Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kmw Inc 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 Kmw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kmw Inc has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Kmw go up and down completely randomly.
Pair Corralation between Daejoo Electronic and Kmw
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the Kmw. But the stock apears to be less risky and, when comparing its historical volatility, Daejoo Electronic Materials is 1.02 times less risky than Kmw. The stock trades about -0.14 of its potential returns per unit of risk. The Kmw Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 747,000 in Kmw Inc on August 29, 2024 and sell it today you would earn a total of 113,000 from holding Kmw Inc or generate 15.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. Kmw Inc
Performance |
| Timeline |
| Daejoo Electronic |
| Kmw Inc |
Daejoo Electronic and Kmw Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and Kmw
The main advantage of trading using opposite Daejoo Electronic and Kmw positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, Kmw 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 Kmw will offset losses from the drop in Kmw's long position.The idea behind Daejoo Electronic Materials and Kmw Inc 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.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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