Correlation Between ED and Daesung Hi
Can any of the company-specific risk be diversified away by investing in both ED and Daesung Hi 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 ED and Daesung Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ED Co and Daesung Hi Tech Co, you can compare the effects of market volatilities on ED and Daesung Hi 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 ED with a short position of Daesung Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of ED and Daesung Hi.
Diversification Opportunities for ED and Daesung Hi
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ED and Daesung is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ED Co and Daesung Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Hi Tech and ED 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 ED Co are associated (or correlated) with Daesung Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Hi Tech has no effect on the direction of ED i.e., ED and Daesung Hi go up and down completely randomly.
Pair Corralation between ED and Daesung Hi
Assuming the 90 days trading horizon ED Co is expected to generate 1.57 times more return on investment than Daesung Hi. However, ED is 1.57 times more volatile than Daesung Hi Tech Co. It trades about 0.03 of its potential returns per unit of risk. Daesung Hi Tech Co is currently generating about -0.04 per unit of risk. If you would invest 2,230,972 in ED Co on September 2, 2024 and sell it today you would earn a total of 429,028 from holding ED Co or generate 19.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ED Co vs. Daesung Hi Tech Co
Performance |
| Timeline |
| ED Co |
| Daesung Hi Tech |
ED and Daesung Hi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ED and Daesung Hi
The main advantage of trading using opposite ED and Daesung Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ED position performs unexpectedly, Daesung Hi 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 Daesung Hi will offset losses from the drop in Daesung Hi's long position.The idea behind ED Co and Daesung Hi Tech Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Daesung Hi vs. Samsung Electronics Co | Daesung Hi vs. Samsung Electronics Co | Daesung Hi vs. LG Energy Solution | Daesung Hi vs. SK Hynix |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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