Correlation Between Design and Oriental Precision
Can any of the company-specific risk be diversified away by investing in both Design and Oriental Precision 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 Design and Oriental Precision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Design Co and Oriental Precision Engineering, you can compare the effects of market volatilities on Design and Oriental Precision 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 Design with a short position of Oriental Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Design and Oriental Precision.
Diversification Opportunities for Design and Oriental Precision
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Design and Oriental is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Design Co and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Design 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 Design Co are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Design i.e., Design and Oriental Precision go up and down completely randomly.
Pair Corralation between Design and Oriental Precision
Assuming the 90 days trading horizon Design Co is expected to under-perform the Oriental Precision. In addition to that, Design is 1.7 times more volatile than Oriental Precision Engineering. It trades about -0.26 of its total potential returns per unit of risk. Oriental Precision Engineering is currently generating about -0.01 per unit of volatility. If you would invest 538,000 in Oriental Precision Engineering on September 24, 2024 and sell it today you would lose (12,000) from holding Oriental Precision Engineering or give up 2.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Design Co vs. Oriental Precision Engineering
Performance |
| Timeline |
| Design |
| Oriental Precision |
Design and Oriental Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Design and Oriental Precision
The main advantage of trading using opposite Design and Oriental Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Design position performs unexpectedly, Oriental Precision 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 Oriental Precision will offset losses from the drop in Oriental Precision's long position.The idea behind Design Co and Oriental Precision Engineering 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.| Oriental Precision vs. KakaoBank Corp | Oriental Precision vs. NICE Information Service | Oriental Precision vs. Korea Information Engineering | Oriental Precision vs. Lotte Data Communication |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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