Correlation Between Daejung Chemicals and Korea Petro
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and Korea Petro 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 Korea Petro 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 Korea Petro Chemical, you can compare the effects of market volatilities on Daejung Chemicals and Korea Petro 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 Korea Petro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Korea Petro.
Diversification Opportunities for Daejung Chemicals and Korea Petro
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Daejung and Korea is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Korea Petro Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Petro Chemical 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 Korea Petro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Petro Chemical has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Korea Petro go up and down completely randomly.
Pair Corralation between Daejung Chemicals and Korea Petro
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to generate 0.49 times more return on investment than Korea Petro. However, Daejung Chemicals Metals is 2.03 times less risky than Korea Petro. It trades about -0.05 of its potential returns per unit of risk. Korea Petro Chemical is currently generating about -0.07 per unit of risk. If you would invest 1,647,569 in Daejung Chemicals Metals on September 14, 2024 and sell it today you would lose (335,569) from holding Daejung Chemicals Metals or give up 20.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. Korea Petro Chemical
Performance |
| Timeline |
| Daejung Chemicals Metals |
| Korea Petro Chemical |
Daejung Chemicals and Korea Petro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and Korea Petro
The main advantage of trading using opposite Daejung Chemicals and Korea Petro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, Korea Petro 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 Korea Petro will offset losses from the drop in Korea Petro's long position.| Daejung Chemicals vs. LG Chem | Daejung Chemicals vs. Chunbo Co | Daejung Chemicals vs. DukSan Neolux CoLtd | Daejung Chemicals vs. LIG ES SPAC |
| Korea Petro vs. Pungguk Ethanol Industrial | Korea Petro vs. EBEST Investment Securities | Korea Petro vs. Daejung Chemicals Metals | Korea Petro vs. DSC Investment |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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