Correlation Between Daejung Chemicals and Orbitech

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Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and Orbitech 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 Orbitech 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 Orbitech Co, you can compare the effects of market volatilities on Daejung Chemicals and Orbitech 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 Orbitech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Orbitech.

Diversification Opportunities for Daejung Chemicals and Orbitech

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Daejung and Orbitech is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Orbitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbitech 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 Orbitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbitech has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Orbitech go up and down completely randomly.

Pair Corralation between Daejung Chemicals and Orbitech

Assuming the 90 days trading horizon Daejung Chemicals is expected to generate 13.35 times less return on investment than Orbitech. But when comparing it to its historical volatility, Daejung Chemicals Metals is 3.59 times less risky than Orbitech. It trades about 0.07 of its potential returns per unit of risk. Orbitech Co is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  201,000  in Orbitech Co on October 20, 2024 and sell it today you would earn a total of  42,500  from holding Orbitech Co or generate 21.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Daejung Chemicals Metals  vs.  Orbitech Co

 Performance 
       Timeline  
Daejung Chemicals Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Daejung Chemicals Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daejung Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Orbitech 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Orbitech Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orbitech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Daejung Chemicals and Orbitech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Daejung Chemicals and Orbitech

The main advantage of trading using opposite Daejung Chemicals and Orbitech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, Orbitech 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 Orbitech will offset losses from the drop in Orbitech's long position.
The idea behind Daejung Chemicals Metals and Orbitech Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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