Correlation Between Tway Air and DRGEM
Can any of the company-specific risk be diversified away by investing in both Tway Air and DRGEM 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 Tway Air and DRGEM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tway Air Co and DRGEM, you can compare the effects of market volatilities on Tway Air and DRGEM 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 Tway Air with a short position of DRGEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tway Air and DRGEM.
Diversification Opportunities for Tway Air and DRGEM
Good diversification
The 3 months correlation between Tway and DRGEM is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tway Air Co and DRGEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRGEM and Tway Air 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 Tway Air Co are associated (or correlated) with DRGEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRGEM has no effect on the direction of Tway Air i.e., Tway Air and DRGEM go up and down completely randomly.
Pair Corralation between Tway Air and DRGEM
Assuming the 90 days trading horizon Tway Air Co is expected to under-perform the DRGEM. But the stock apears to be less risky and, when comparing its historical volatility, Tway Air Co is 1.53 times less risky than DRGEM. The stock trades about -0.36 of its potential returns per unit of risk. The DRGEM is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 670,000 in DRGEM on September 4, 2024 and sell it today you would lose (54,000) from holding DRGEM or give up 8.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tway Air Co vs. DRGEM
Performance |
| Timeline |
| Tway Air |
| DRGEM |
Tway Air and DRGEM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tway Air and DRGEM
The main advantage of trading using opposite Tway Air and DRGEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tway Air position performs unexpectedly, DRGEM 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 DRGEM will offset losses from the drop in DRGEM's long position.| Tway Air vs. Jin Air Co | Tway Air vs. Air Busan Co | Tway Air vs. Busan Industrial Co | Tway Air vs. UNISEM Co |
| DRGEM vs. Seah Steel Corp | DRGEM vs. Dongbang Ship Machinery | DRGEM vs. Nam Hwa Construction | DRGEM vs. Sempio Foods Co |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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