Correlation Between Cheryong Industrial and Dongwon System
Can any of the company-specific risk be diversified away by investing in both Cheryong Industrial and Dongwon System 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 Cheryong Industrial and Dongwon System into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheryong Industrial CoLtd and Dongwon System, you can compare the effects of market volatilities on Cheryong Industrial and Dongwon System 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 Cheryong Industrial with a short position of Dongwon System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheryong Industrial and Dongwon System.
Diversification Opportunities for Cheryong Industrial and Dongwon System
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cheryong and Dongwon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Dongwon System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon System has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Dongwon System go up and down completely randomly.
Pair Corralation between Cheryong Industrial and Dongwon System
Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to generate 0.85 times more return on investment than Dongwon System. However, Cheryong Industrial CoLtd is 1.17 times less risky than Dongwon System. It trades about 0.36 of its potential returns per unit of risk. Dongwon System is currently generating about -0.08 per unit of risk. If you would invest 520,220 in Cheryong Industrial CoLtd on October 14, 2024 and sell it today you would earn a total of 74,780 from holding Cheryong Industrial CoLtd or generate 14.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheryong Industrial CoLtd vs. Dongwon System
Performance |
| Timeline |
| Cheryong Industrial CoLtd |
| Dongwon System |
Cheryong Industrial and Dongwon System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheryong Industrial and Dongwon System
The main advantage of trading using opposite Cheryong Industrial and Dongwon System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheryong Industrial position performs unexpectedly, Dongwon System 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 Dongwon System will offset losses from the drop in Dongwon System's long position.| Cheryong Industrial vs. Shin Steel Co | Cheryong Industrial vs. Formetal Co | Cheryong Industrial vs. Jeil Steel Mfg | Cheryong Industrial vs. Dongil Metal Co |
| Dongwon System vs. Pyung Hwa Industrial | Dongwon System vs. Shinil Industrial Co | Dongwon System vs. Cheryong Industrial CoLtd | Dongwon System vs. Industrial Bank |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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