Correlation Between Daejung Chemicals and Korean Reinsurance
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and Korean Reinsurance 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 Daejung Chemicals and Korean Reinsurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejung Chemicals Metals and Korean Reinsurance Co, you can compare the effects of market volatilities on Daejung Chemicals and Korean Reinsurance 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 Daejung Chemicals with a short position of Korean Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Korean Reinsurance.
Diversification Opportunities for Daejung Chemicals and Korean Reinsurance
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Daejung and Korean is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Korean Reinsurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Reinsurance and Daejung Chemicals 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 Daejung Chemicals Metals are associated (or correlated) with Korean Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Reinsurance has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Korean Reinsurance go up and down completely randomly.
Pair Corralation between Daejung Chemicals and Korean Reinsurance
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to under-perform the Korean Reinsurance. In addition to that, Daejung Chemicals is 1.37 times more volatile than Korean Reinsurance Co. It trades about -0.32 of its total potential returns per unit of risk. Korean Reinsurance Co is currently generating about 0.12 per unit of volatility. If you would invest 786,666 in Korean Reinsurance Co on September 1, 2024 and sell it today you would earn a total of 24,334 from holding Korean Reinsurance Co or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. Korean Reinsurance Co
Performance |
| Timeline |
| Daejung Chemicals Metals |
| Korean Reinsurance |
Daejung Chemicals and Korean Reinsurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and Korean Reinsurance
The main advantage of trading using opposite Daejung Chemicals and Korean Reinsurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, Korean Reinsurance 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 Korean Reinsurance will offset losses from the drop in Korean Reinsurance's long position.| Daejung Chemicals vs. LG Chem | Daejung Chemicals vs. Chunbo Co | Daejung Chemicals vs. Hyosung Chemical Corp | Daejung Chemicals vs. LIG ES SPAC |
| Korean Reinsurance vs. SH Energy Chemical | Korean Reinsurance vs. Namhae Chemical | Korean Reinsurance vs. JC Chemical Co | Korean Reinsurance vs. Sung Bo Chemicals |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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