Correlation Between Daejung Chemicals and Kolon Plastics
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and Kolon Plastics 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 Kolon Plastics 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 Kolon Plastics, you can compare the effects of market volatilities on Daejung Chemicals and Kolon Plastics 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 Kolon Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and Kolon Plastics.
Diversification Opportunities for Daejung Chemicals and Kolon Plastics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daejung and Kolon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Kolon Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Plastics 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 Kolon Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Plastics has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Kolon Plastics go up and down completely randomly.
Pair Corralation between Daejung Chemicals and Kolon Plastics
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to generate 0.52 times more return on investment than Kolon Plastics. However, Daejung Chemicals Metals is 1.92 times less risky than Kolon Plastics. It trades about 0.22 of its potential returns per unit of risk. Kolon Plastics is currently generating about -0.07 per unit of risk. If you would invest 1,269,000 in Daejung Chemicals Metals on October 27, 2024 and sell it today you would earn a total of 51,000 from holding Daejung Chemicals Metals or generate 4.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. Kolon Plastics
Performance |
| Timeline |
| Daejung Chemicals Metals |
| Kolon Plastics |
Daejung Chemicals and Kolon Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and Kolon Plastics
The main advantage of trading using opposite Daejung Chemicals and Kolon Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, Kolon Plastics 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 Kolon Plastics will offset losses from the drop in Kolon Plastics' long position.| Daejung Chemicals vs. Mirai Semiconductors Co | Daejung Chemicals vs. Haesung Industrial Co | Daejung Chemicals vs. Cuckoo Electronics Co | Daejung Chemicals vs. Samyoung Electronics Co |
| Kolon Plastics vs. NH Investment Securities | Kolon Plastics vs. Mirai Semiconductors Co | Kolon Plastics vs. Pureun Mutual Savings | Kolon Plastics 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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