Correlation Between Dongwoo Farm and Daejung Chemicals
Can any of the company-specific risk be diversified away by investing in both Dongwoo Farm and Daejung Chemicals 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 Daejung Chemicals 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 Daejung Chemicals Metals, you can compare the effects of market volatilities on Dongwoo Farm and Daejung Chemicals 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 Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and Daejung Chemicals.
Diversification Opportunities for Dongwoo Farm and Daejung Chemicals
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dongwoo and Daejung is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals 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 Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Daejung Chemicals go up and down completely randomly.
Pair Corralation between Dongwoo Farm and Daejung Chemicals
Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 0.9 times more return on investment than Daejung Chemicals. However, Dongwoo Farm To is 1.11 times less risky than Daejung Chemicals. It trades about -0.08 of its potential returns per unit of risk. Daejung Chemicals Metals is currently generating about -0.19 per unit of risk. If you would invest 195,700 in Dongwoo Farm To on November 7, 2024 and sell it today you would lose (2,700) from holding Dongwoo Farm To or give up 1.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongwoo Farm To vs. Daejung Chemicals Metals
Performance |
| Timeline |
| Dongwoo Farm To |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Daejung Chemicals Metals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dongwoo Farm and Daejung Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwoo Farm and Daejung Chemicals
The main advantage of trading using opposite Dongwoo Farm and Daejung Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwoo Farm position performs unexpectedly, Daejung Chemicals 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 Daejung Chemicals will offset losses from the drop in Daejung Chemicals' long position.| Dongwoo Farm vs. Dongnam Chemical Co | Dongwoo Farm vs. ISU Chemical Co | Dongwoo Farm vs. FNC Entertainment Co | Dongwoo Farm vs. Kaonmedia Co |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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