Correlation Between Haitai Confectionery and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both Haitai Confectionery and Daewoo Engineering 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 Haitai Confectionery and Daewoo Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Haitai Confectionery Foods and Daewoo Engineering Construction, you can compare the effects of market volatilities on Haitai Confectionery and Daewoo Engineering 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 Haitai Confectionery with a short position of Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haitai Confectionery and Daewoo Engineering.
Diversification Opportunities for Haitai Confectionery and Daewoo Engineering
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Haitai and Daewoo is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Haitai Confectionery Foods and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering and Haitai Confectionery 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 Haitai Confectionery Foods are associated (or correlated) with Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of Haitai Confectionery i.e., Haitai Confectionery and Daewoo Engineering go up and down completely randomly.
Pair Corralation between Haitai Confectionery and Daewoo Engineering
Assuming the 90 days trading horizon Haitai Confectionery is expected to generate 1.25 times less return on investment than Daewoo Engineering. But when comparing it to its historical volatility, Haitai Confectionery Foods is 1.73 times less risky than Daewoo Engineering. It trades about 0.22 of its potential returns per unit of risk. Daewoo Engineering Construction is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 337,500 in Daewoo Engineering Construction on November 27, 2024 and sell it today you would earn a total of 21,500 from holding Daewoo Engineering Construction or generate 6.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Haitai Confectionery Foods vs. Daewoo Engineering Constructio
Performance |
| Timeline |
| Haitai Confectionery |
| Daewoo Engineering |
Haitai Confectionery and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Haitai Confectionery and Daewoo Engineering
The main advantage of trading using opposite Haitai Confectionery and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haitai Confectionery position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.The idea behind Haitai Confectionery Foods and Daewoo Engineering Construction 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.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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