Correlation Between Dongwoo Farm and Kukdo Chemical
Can any of the company-specific risk be diversified away by investing in both Dongwoo Farm and Kukdo Chemical 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 Dongwoo Farm and Kukdo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwoo Farm To and Kukdo Chemical Co, you can compare the effects of market volatilities on Dongwoo Farm and Kukdo Chemical 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 Dongwoo Farm with a short position of Kukdo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and Kukdo Chemical.
Diversification Opportunities for Dongwoo Farm and Kukdo Chemical
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongwoo and Kukdo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Kukdo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdo Chemical and Dongwoo Farm 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 Dongwoo Farm To are associated (or correlated) with Kukdo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdo Chemical has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Kukdo Chemical go up and down completely randomly.
Pair Corralation between Dongwoo Farm and Kukdo Chemical
Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 0.77 times more return on investment than Kukdo Chemical. However, Dongwoo Farm To is 1.3 times less risky than Kukdo Chemical. It trades about -0.16 of its potential returns per unit of risk. Kukdo Chemical Co is currently generating about -0.32 per unit of risk. If you would invest 198,000 in Dongwoo Farm To on August 25, 2024 and sell it today you would lose (9,300) from holding Dongwoo Farm To or give up 4.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwoo Farm To vs. Kukdo Chemical Co
Performance |
| Timeline |
| Dongwoo Farm To |
| Kukdo Chemical |
Dongwoo Farm and Kukdo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwoo Farm and Kukdo Chemical
The main advantage of trading using opposite Dongwoo Farm and Kukdo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwoo Farm position performs unexpectedly, Kukdo Chemical 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 Kukdo Chemical will offset losses from the drop in Kukdo Chemical's long position.| Dongwoo Farm vs. Maeil Dairies Co | Dongwoo Farm vs. HYUNDAI FEED | Dongwoo Farm vs. Wooyang Co | Dongwoo Farm vs. Asia Seed CoLtd |
| Kukdo Chemical vs. Dongwoo Farm To | Kukdo Chemical vs. Stic Investments | Kukdo Chemical vs. Korea Investment Holdings | Kukdo Chemical vs. ENERGYMACHINERY KOREA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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