Correlation Between Ray and Daekyung Machinery
Can any of the company-specific risk be diversified away by investing in both Ray and Daekyung Machinery 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 Ray and Daekyung Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ray Co and Daekyung Machinery Engineering, you can compare the effects of market volatilities on Ray and Daekyung Machinery 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 Ray with a short position of Daekyung Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ray and Daekyung Machinery.
Diversification Opportunities for Ray and Daekyung Machinery
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ray and Daekyung is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ray Co and Daekyung Machinery Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daekyung Machinery and Ray 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 Ray Co are associated (or correlated) with Daekyung Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daekyung Machinery has no effect on the direction of Ray i.e., Ray and Daekyung Machinery go up and down completely randomly.
Pair Corralation between Ray and Daekyung Machinery
Assuming the 90 days trading horizon Ray Co is expected to under-perform the Daekyung Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Ray Co is 1.22 times less risky than Daekyung Machinery. The stock trades about -0.45 of its potential returns per unit of risk. The Daekyung Machinery Engineering is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 40,600 in Daekyung Machinery Engineering on September 1, 2024 and sell it today you would earn a total of 10,900 from holding Daekyung Machinery Engineering or generate 26.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 86.96% |
| Values | Daily Returns |
Ray Co vs. Daekyung Machinery Engineering
Performance |
| Timeline |
| Ray Co |
| Daekyung Machinery |
Ray and Daekyung Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ray and Daekyung Machinery
The main advantage of trading using opposite Ray and Daekyung Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ray position performs unexpectedly, Daekyung Machinery 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 Daekyung Machinery will offset losses from the drop in Daekyung Machinery's long position.| Ray vs. Korean Air Lines | Ray vs. Koryo Credit Information | Ray vs. Dongbu Insurance Co | Ray vs. Total Soft Bank |
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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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