Correlation Between DRGEM and Ray
Can any of the company-specific risk be diversified away by investing in both DRGEM and Ray 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 Ray into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DRGEM and Ray Co, you can compare the effects of market volatilities on DRGEM and Ray 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 Ray. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRGEM and Ray.
Diversification Opportunities for DRGEM and Ray
Average diversification
The 3 months correlation between DRGEM and Ray is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding DRGEM and Ray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ray Co 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 Ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ray Co has no effect on the direction of DRGEM i.e., DRGEM and Ray go up and down completely randomly.
Pair Corralation between DRGEM and Ray
Assuming the 90 days trading horizon DRGEM is expected to under-perform the Ray. But the stock apears to be less risky and, when comparing its historical volatility, DRGEM is 2.46 times less risky than Ray. The stock trades about -0.4 of its potential returns per unit of risk. The Ray Co is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 753,000 in Ray Co on November 27, 2024 and sell it today you would earn a total of 117,000 from holding Ray Co or generate 15.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DRGEM vs. Ray Co
Performance |
| Timeline |
| DRGEM |
| Ray Co |
DRGEM and Ray Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DRGEM and Ray
The main advantage of trading using opposite DRGEM and Ray positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRGEM position performs unexpectedly, Ray 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 Ray will offset losses from the drop in Ray's long position.| DRGEM vs. GS Retail Co | DRGEM vs. Korea Computer | DRGEM vs. ADTechnology CoLtd | DRGEM vs. Guyoung Technology Co |
| Ray vs. LG Household Healthcare | Ray vs. Samick Musical Instruments | Ray vs. NICE Information Service | Ray vs. Koryo Credit Information |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |