Correlation Between Daejoo Electronic and ABCO Electronics
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and ABCO Electronics 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 ABCO Electronics 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 ABCO Electronics Co, you can compare the effects of market volatilities on Daejoo Electronic and ABCO Electronics 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 ABCO Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and ABCO Electronics.
Diversification Opportunities for Daejoo Electronic and ABCO Electronics
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Daejoo and ABCO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and ABCO Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABCO Electronics 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 ABCO Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABCO Electronics has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and ABCO Electronics go up and down completely randomly.
Pair Corralation between Daejoo Electronic and ABCO Electronics
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the ABCO Electronics. In addition to that, Daejoo Electronic is 1.03 times more volatile than ABCO Electronics Co. It trades about -0.21 of its total potential returns per unit of risk. ABCO Electronics Co is currently generating about -0.1 per unit of volatility. If you would invest 504,000 in ABCO Electronics Co on August 25, 2024 and sell it today you would lose (42,500) from holding ABCO Electronics Co or give up 8.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. ABCO Electronics Co
Performance |
| Timeline |
| Daejoo Electronic |
| ABCO Electronics |
Daejoo Electronic and ABCO Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and ABCO Electronics
The main advantage of trading using opposite Daejoo Electronic and ABCO Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, ABCO Electronics 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 ABCO Electronics will offset losses from the drop in ABCO Electronics' long position.The idea behind Daejoo Electronic Materials and ABCO Electronics 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.| ABCO Electronics vs. Korea Real Estate | ABCO Electronics vs. Korea Ratings Co | ABCO Electronics vs. IQuest Co | ABCO Electronics vs. Wonbang Tech 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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