Correlation Between Dongbang Ship and DRGEM
Can any of the company-specific risk be diversified away by investing in both Dongbang Ship 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 Dongbang Ship and DRGEM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongbang Ship Machinery and DRGEM, you can compare the effects of market volatilities on Dongbang Ship 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 Dongbang Ship with a short position of DRGEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Ship and DRGEM.
Diversification Opportunities for Dongbang Ship and DRGEM
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dongbang and DRGEM is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery and DRGEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRGEM and Dongbang Ship 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 Dongbang Ship Machinery 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 Dongbang Ship i.e., Dongbang Ship and DRGEM go up and down completely randomly.
Pair Corralation between Dongbang Ship and DRGEM
Assuming the 90 days trading horizon Dongbang Ship Machinery is expected to generate 1.72 times more return on investment than DRGEM. However, Dongbang Ship is 1.72 times more volatile than DRGEM. It trades about 0.04 of its potential returns per unit of risk. DRGEM is currently generating about -0.14 per unit of risk. If you would invest 224,000 in Dongbang Ship Machinery on September 4, 2024 and sell it today you would earn a total of 48,000 from holding Dongbang Ship Machinery or generate 21.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dongbang Ship Machinery vs. DRGEM
Performance |
| Timeline |
| Dongbang Ship Machinery |
| DRGEM |
Dongbang Ship and DRGEM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dongbang Ship and DRGEM
The main advantage of trading using opposite Dongbang Ship and DRGEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongbang Ship 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.| Dongbang Ship vs. LG Display | Dongbang Ship vs. Hyundai Motor | Dongbang Ship vs. Hyundai Motor Co | Dongbang Ship vs. Hyundai Motor 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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