Correlation Between Maeil Dairies and FoodNamoo
Can any of the company-specific risk be diversified away by investing in both Maeil Dairies and FoodNamoo 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 Maeil Dairies and FoodNamoo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maeil Dairies Co and FoodNamoo, you can compare the effects of market volatilities on Maeil Dairies and FoodNamoo 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 Maeil Dairies with a short position of FoodNamoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maeil Dairies and FoodNamoo.
Diversification Opportunities for Maeil Dairies and FoodNamoo
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Maeil and FoodNamoo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Maeil Dairies Co and FoodNamoo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FoodNamoo and Maeil Dairies 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 Maeil Dairies Co are associated (or correlated) with FoodNamoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FoodNamoo has no effect on the direction of Maeil Dairies i.e., Maeil Dairies and FoodNamoo go up and down completely randomly.
Pair Corralation between Maeil Dairies and FoodNamoo
Assuming the 90 days trading horizon Maeil Dairies Co is expected to generate 0.25 times more return on investment than FoodNamoo. However, Maeil Dairies Co is 3.95 times less risky than FoodNamoo. It trades about -0.08 of its potential returns per unit of risk. FoodNamoo is currently generating about -0.06 per unit of risk. If you would invest 4,090,000 in Maeil Dairies Co on November 3, 2024 and sell it today you would lose (780,000) from holding Maeil Dairies Co or give up 19.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.89% |
| Values | Daily Returns |
Maeil Dairies Co vs. FoodNamoo
Performance |
| Timeline |
| Maeil Dairies |
| FoodNamoo |
Maeil Dairies and FoodNamoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maeil Dairies and FoodNamoo
The main advantage of trading using opposite Maeil Dairies and FoodNamoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maeil Dairies position performs unexpectedly, FoodNamoo 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 FoodNamoo will offset losses from the drop in FoodNamoo's long position.The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Maeil Dairies as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Maeil Dairies' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Maeil Dairies' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Maeil Dairies Co.
| FoodNamoo vs. Maeil Dairies Co | FoodNamoo vs. HYUNDAI FEED | FoodNamoo vs. Neo Cremar Co | FoodNamoo vs. Dongwoo Farm To |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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