Correlation Between Daejung Chemicals and FoodNamoo
Can any of the company-specific risk be diversified away by investing in both Daejung Chemicals and FoodNamoo 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 FoodNamoo 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 FoodNamoo, you can compare the effects of market volatilities on Daejung Chemicals and FoodNamoo 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 FoodNamoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejung Chemicals and FoodNamoo.
Diversification Opportunities for Daejung Chemicals and FoodNamoo
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daejung and FoodNamoo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and FoodNamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FoodNamoo 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 FoodNamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FoodNamoo has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and FoodNamoo go up and down completely randomly.
Pair Corralation between Daejung Chemicals and FoodNamoo
Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to under-perform the FoodNamoo. But the stock apears to be less risky and, when comparing its historical volatility, Daejung Chemicals Metals is 1.48 times less risky than FoodNamoo. The stock trades about -0.12 of its potential returns per unit of risk. The FoodNamoo is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 352,500 in FoodNamoo on September 13, 2024 and sell it today you would lose (20,500) from holding FoodNamoo or give up 5.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejung Chemicals Metals vs. FoodNamoo
Performance |
| Timeline |
| Daejung Chemicals Metals |
| FoodNamoo |
Daejung Chemicals and FoodNamoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejung Chemicals and FoodNamoo
The main advantage of trading using opposite Daejung Chemicals and FoodNamoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejung Chemicals position performs unexpectedly, FoodNamoo 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 FoodNamoo will offset losses from the drop in FoodNamoo'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 |
| FoodNamoo vs. Maeil Dairies Co | FoodNamoo vs. HYUNDAI FEED | FoodNamoo vs. Neo Cremar Co | FoodNamoo vs. Dongwoo Farm To |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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