Correlation Between DRGEM and Cheryong Industrial
Can any of the company-specific risk be diversified away by investing in both DRGEM and Cheryong Industrial 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 DRGEM and Cheryong Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DRGEM and Cheryong Industrial CoLtd, you can compare the effects of market volatilities on DRGEM and Cheryong Industrial 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 DRGEM with a short position of Cheryong Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRGEM and Cheryong Industrial.
Diversification Opportunities for DRGEM and Cheryong Industrial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between DRGEM and Cheryong is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding DRGEM and Cheryong Industrial CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Industrial CoLtd and DRGEM 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 DRGEM are associated (or correlated) with Cheryong Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Industrial CoLtd has no effect on the direction of DRGEM i.e., DRGEM and Cheryong Industrial go up and down completely randomly.
Pair Corralation between DRGEM and Cheryong Industrial
Assuming the 90 days trading horizon DRGEM is expected to under-perform the Cheryong Industrial. But the stock apears to be less risky and, when comparing its historical volatility, DRGEM is 3.05 times less risky than Cheryong Industrial. The stock trades about -0.17 of its potential returns per unit of risk. The Cheryong Industrial CoLtd is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 705,000 in Cheryong Industrial CoLtd on September 3, 2024 and sell it today you would lose (191,000) from holding Cheryong Industrial CoLtd or give up 27.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
DRGEM vs. Cheryong Industrial CoLtd
Performance |
| Timeline |
| DRGEM |
| Cheryong Industrial CoLtd |
DRGEM and Cheryong Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DRGEM and Cheryong Industrial
The main advantage of trading using opposite DRGEM and Cheryong Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRGEM position performs unexpectedly, Cheryong Industrial 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 Cheryong Industrial will offset losses from the drop in Cheryong Industrial's long position.| DRGEM vs. Namhwa Industrial Co | DRGEM vs. Jeong Moon Information | DRGEM vs. Tway Air Co | DRGEM vs. Daiyang Metal Co |
| Cheryong Industrial vs. SEOJEON ELECTRIC MACHINERY | Cheryong Industrial vs. NH Investment Securities | Cheryong Industrial vs. Keyang Electric Machinery | Cheryong Industrial vs. Atinum Investment Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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