Correlation Between Dongwoo Farm and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both Dongwoo Farm and Daewoo Engineering 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 Daewoo Engineering 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 Daewoo Engineering Construction, you can compare the effects of market volatilities on Dongwoo Farm and Daewoo Engineering 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 Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and Daewoo Engineering.
Diversification Opportunities for Dongwoo Farm and Daewoo Engineering
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongwoo and Daewoo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering 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 Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Daewoo Engineering go up and down completely randomly.
Pair Corralation between Dongwoo Farm and Daewoo Engineering
Assuming the 90 days trading horizon Dongwoo Farm To is expected to under-perform the Daewoo Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Dongwoo Farm To is 1.73 times less risky than Daewoo Engineering. The stock trades about -0.19 of its potential returns per unit of risk. The Daewoo Engineering Construction is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 360,000 in Daewoo Engineering Construction on September 3, 2024 and sell it today you would earn a total of 9,000 from holding Daewoo Engineering Construction or generate 2.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwoo Farm To vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| Dongwoo Farm To |
| Daewoo Engineering |
Dongwoo Farm and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwoo Farm and Daewoo Engineering
The main advantage of trading using opposite Dongwoo Farm and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwoo Farm position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.| Dongwoo Farm vs. Hanjoo Light Metal | Dongwoo Farm vs. LG Chemicals | Dongwoo Farm vs. Hannong Chemicals | Dongwoo Farm vs. Kukil Metal Co |
| Daewoo Engineering vs. Netmarble Games Corp | Daewoo Engineering vs. Polaris Office Corp | Daewoo Engineering vs. Daejoo Electronic Materials | Daewoo Engineering vs. Home Center Holdings |
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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