Correlation Between Formetal and Daejung Chemicals
Can any of the company-specific risk be diversified away by investing in both Formetal and Daejung Chemicals 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 Formetal and Daejung Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Daejung Chemicals Metals, you can compare the effects of market volatilities on Formetal and Daejung Chemicals 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 Formetal with a short position of Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Daejung Chemicals.
Diversification Opportunities for Formetal and Daejung Chemicals
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Formetal and Daejung is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals and Formetal 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 Formetal Co are associated (or correlated) with Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of Formetal i.e., Formetal and Daejung Chemicals go up and down completely randomly.
Pair Corralation between Formetal and Daejung Chemicals
Assuming the 90 days trading horizon Formetal Co is expected to generate 3.81 times more return on investment than Daejung Chemicals. However, Formetal is 3.81 times more volatile than Daejung Chemicals Metals. It trades about 0.27 of its potential returns per unit of risk. Daejung Chemicals Metals is currently generating about -0.1 per unit of risk. If you would invest 333,000 in Formetal Co on November 9, 2024 and sell it today you would earn a total of 76,000 from holding Formetal Co or generate 22.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. Daejung Chemicals Metals
Performance |
| Timeline |
| Formetal |
| Daejung Chemicals Metals |
Formetal and Daejung Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Daejung Chemicals
The main advantage of trading using opposite Formetal and Daejung Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal position performs unexpectedly, Daejung Chemicals 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 Daejung Chemicals will offset losses from the drop in Daejung Chemicals' long position.| Formetal vs. GS Retail Co | Formetal vs. Kisan Telecom Co | Formetal vs. Digital Imaging Technology | Formetal vs. Puloon Technology |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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