Correlation Between Daejung Chemicals and Namyang Dairy
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and Namyang Dairy 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 Namyang Dairy 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 Namyang Dairy, you can compare the effects of market volatilities on Daejung Chemicals and Namyang Dairy 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 Namyang Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Namyang Dairy.
Diversification Opportunities for Daejung Chemicals and Namyang Dairy
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daejung and Namyang is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Namyang Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Namyang Dairy 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 Namyang Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Namyang Dairy has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Namyang Dairy go up and down completely randomly.
Pair Corralation between Daejung Chemicals and Namyang Dairy
Assuming the 90 days trading horizon Daejung Chemicals is expected to generate 1.59 times less return on investment than Namyang Dairy. But when comparing it to its historical volatility, Daejung Chemicals Metals is 1.61 times less risky than Namyang Dairy. It trades about 0.1 of its potential returns per unit of risk. Namyang Dairy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,250,000 in Namyang Dairy on October 18, 2024 and sell it today you would earn a total of 190,000 from holding Namyang Dairy or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. Namyang Dairy
Performance |
| Timeline |
| Daejung Chemicals Metals |
| Namyang Dairy |
Daejung Chemicals and Namyang Dairy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and Namyang Dairy
The main advantage of trading using opposite Daejung Chemicals and Namyang Dairy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, Namyang Dairy 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 Namyang Dairy will offset losses from the drop in Namyang Dairy's long position.| Daejung Chemicals vs. Settlebank | Daejung Chemicals vs. Industrial Bank | Daejung Chemicals vs. Incar Financial Service | Daejung Chemicals vs. Daiyang Metal Co |
| Namyang Dairy vs. Finebesteel | Namyang Dairy vs. DC Media Co | Namyang Dairy vs. Hankook Steel Co | Namyang Dairy vs. Lotte Chilsung Beverage |
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.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |