Correlation Between Daejung Chemicals and Daewon Chemical
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and Daewon Chemical 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 Daewon Chemical 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 Daewon Chemical Co, you can compare the effects of market volatilities on Daejung Chemicals and Daewon Chemical 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 Daewon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Daewon Chemical.
Diversification Opportunities for Daejung Chemicals and Daewon Chemical
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daejung and Daewon is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Daewon Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon 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 Daewon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewon Chemical has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Daewon Chemical go up and down completely randomly.
Pair Corralation between Daejung Chemicals and Daewon Chemical
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to under-perform the Daewon Chemical. In addition to that, Daejung Chemicals is 1.28 times more volatile than Daewon Chemical Co. It trades about -0.19 of its total potential returns per unit of risk. Daewon Chemical Co is currently generating about -0.23 per unit of volatility. If you would invest 102,000 in Daewon Chemical Co on November 6, 2024 and sell it today you would lose (3,200) from holding Daewon Chemical Co or give up 3.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. Daewon Chemical Co
Performance |
| Timeline |
| Daejung Chemicals Metals |
| Daewon Chemical |
Daejung Chemicals and Daewon Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and Daewon Chemical
The main advantage of trading using opposite Daejung Chemicals and Daewon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, Daewon Chemical 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 Daewon Chemical will offset losses from the drop in Daewon Chemical's long position.| Daejung Chemicals vs. Kukdong Oil Chemicals | Daejung Chemicals vs. SH Energy Chemical | Daejung Chemicals vs. Samsung Life Insurance | Daejung Chemicals vs. Kyung In Synthetic Corp |
| Daewon Chemical vs. Atinum Investment Co | Daewon Chemical vs. TS Investment Corp | Daewon Chemical vs. DB Financial Investment | Daewon Chemical vs. Sangsangin Investment Securities |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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