Correlation Between Daejoo Electronic and Solus Advanced
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Solus Advanced 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 Solus Advanced 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 Solus Advanced Materials, you can compare the effects of market volatilities on Daejoo Electronic and Solus Advanced 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 Solus Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Solus Advanced.
Diversification Opportunities for Daejoo Electronic and Solus Advanced
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Daejoo and Solus is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Solus Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solus Advanced Materials 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 Solus Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solus Advanced Materials has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Solus Advanced go up and down completely randomly.
Pair Corralation between Daejoo Electronic and Solus Advanced
Assuming the 90 days trading horizon Daejoo Electronic is expected to generate 44.56 times less return on investment than Solus Advanced. In addition to that, Daejoo Electronic is 1.09 times more volatile than Solus Advanced Materials. It trades about 0.0 of its total potential returns per unit of risk. Solus Advanced Materials is currently generating about 0.1 per unit of volatility. If you would invest 864,000 in Solus Advanced Materials on October 12, 2024 and sell it today you would earn a total of 46,000 from holding Solus Advanced Materials or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. Solus Advanced Materials
Performance |
| Timeline |
| Daejoo Electronic |
| Solus Advanced Materials |
Daejoo Electronic and Solus Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and Solus Advanced
The main advantage of trading using opposite Daejoo Electronic and Solus Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, Solus Advanced 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 Solus Advanced will offset losses from the drop in Solus Advanced's long position.The idea behind Daejoo Electronic Materials and Solus Advanced Materials 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.| Solus Advanced vs. Jeju Semiconductor Corp | Solus Advanced vs. Leaders Technology Investment | Solus Advanced vs. DB Insurance Co | Solus Advanced vs. KTB Investment Securities |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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