Correlation Between Dongwoo Farm and Digital Multimedia
Can any of the company-specific risk be diversified away by investing in both Dongwoo Farm and Digital Multimedia 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 Digital Multimedia 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 Digital Multimedia Technology, you can compare the effects of market volatilities on Dongwoo Farm and Digital Multimedia 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 Digital Multimedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and Digital Multimedia.
Diversification Opportunities for Dongwoo Farm and Digital Multimedia
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dongwoo and Digital is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Digital Multimedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Multimedia 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 Digital Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Multimedia has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Digital Multimedia go up and down completely randomly.
Pair Corralation between Dongwoo Farm and Digital Multimedia
Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 0.5 times more return on investment than Digital Multimedia. However, Dongwoo Farm To is 2.0 times less risky than Digital Multimedia. It trades about -0.12 of its potential returns per unit of risk. Digital Multimedia Technology is currently generating about -0.26 per unit of risk. If you would invest 199,400 in Dongwoo Farm To on August 31, 2024 and sell it today you would lose (7,400) from holding Dongwoo Farm To or give up 3.71% 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. Digital Multimedia Technology
Performance |
| Timeline |
| Dongwoo Farm To |
| Digital Multimedia |
Dongwoo Farm and Digital Multimedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongwoo Farm and Digital Multimedia
The main advantage of trading using opposite Dongwoo Farm and Digital Multimedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwoo Farm position performs unexpectedly, Digital Multimedia 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 Digital Multimedia will offset losses from the drop in Digital Multimedia's long position.| Dongwoo Farm vs. Maeil Dairies Co | Dongwoo Farm vs. Busan Industrial Co | Dongwoo Farm vs. Busan Ind | Dongwoo Farm vs. Mirae Asset Daewoo |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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