Correlation Between Daejoo Electronic and Korea Investment
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Korea Investment 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 Korea Investment 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 Korea Investment Holdings, you can compare the effects of market volatilities on Daejoo Electronic and Korea Investment 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 Korea Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Korea Investment.
Diversification Opportunities for Daejoo Electronic and Korea Investment
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daejoo and Korea is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Korea Investment Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Investment Holdings 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 Korea Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Investment Holdings has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Korea Investment go up and down completely randomly.
Pair Corralation between Daejoo Electronic and Korea Investment
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the Korea Investment. In addition to that, Daejoo Electronic is 3.66 times more volatile than Korea Investment Holdings. It trades about -0.23 of its total potential returns per unit of risk. Korea Investment Holdings is currently generating about -0.02 per unit of volatility. If you would invest 5,320,000 in Korea Investment Holdings on August 28, 2024 and sell it today you would lose (20,000) from holding Korea Investment Holdings or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. Korea Investment Holdings
Performance |
| Timeline |
| Daejoo Electronic |
| Korea Investment Holdings |
Daejoo Electronic and Korea Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and Korea Investment
The main advantage of trading using opposite Daejoo Electronic and Korea Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, Korea Investment 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 Korea Investment will offset losses from the drop in Korea Investment's long position.The idea behind Daejoo Electronic Materials and Korea Investment Holdings 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.| Korea Investment vs. Samji Electronics Co | Korea Investment vs. Sunny Electronics Corp | Korea Investment vs. Genie Music | Korea Investment vs. Alton Sports CoLtd |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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