Correlation Between Dongyang and InnoTherapy
Can any of the company-specific risk be diversified away by investing in both Dongyang and InnoTherapy 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 Dongyang and InnoTherapy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongyang EP and InnoTherapy, you can compare the effects of market volatilities on Dongyang and InnoTherapy 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 Dongyang with a short position of InnoTherapy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongyang and InnoTherapy.
Diversification Opportunities for Dongyang and InnoTherapy
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dongyang and InnoTherapy is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dongyang EP and InnoTherapy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnoTherapy and Dongyang 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 Dongyang EP are associated (or correlated) with InnoTherapy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnoTherapy has no effect on the direction of Dongyang i.e., Dongyang and InnoTherapy go up and down completely randomly.
Pair Corralation between Dongyang and InnoTherapy
Assuming the 90 days trading horizon Dongyang EP is expected to generate 0.81 times more return on investment than InnoTherapy. However, Dongyang EP is 1.23 times less risky than InnoTherapy. It trades about 0.04 of its potential returns per unit of risk. InnoTherapy is currently generating about 0.0 per unit of risk. If you would invest 1,404,177 in Dongyang EP on September 14, 2024 and sell it today you would earn a total of 435,823 from holding Dongyang EP or generate 31.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Dongyang EP vs. InnoTherapy
Performance |
| Timeline |
| Dongyang EP |
| InnoTherapy |
Dongyang and InnoTherapy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongyang and InnoTherapy
The main advantage of trading using opposite Dongyang and InnoTherapy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongyang position performs unexpectedly, InnoTherapy 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 InnoTherapy will offset losses from the drop in InnoTherapy's long position.| Dongyang vs. InnoTherapy | Dongyang vs. Seoul Broadcasting System | Dongyang vs. Mobile Appliance | Dongyang vs. Digital Power Communications |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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