Correlation Between Lake Materials and Daejoo Electronic
Can any of the company-specific risk be diversified away by investing in both Lake Materials and Daejoo Electronic 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 Lake Materials and Daejoo Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Materials Co and Daejoo Electronic Materials, you can compare the effects of market volatilities on Lake Materials and Daejoo Electronic 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 Lake Materials with a short position of Daejoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Materials and Daejoo Electronic.
Diversification Opportunities for Lake Materials and Daejoo Electronic
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lake and Daejoo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lake Materials Co and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic and Lake Materials 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 Lake Materials Co are associated (or correlated) with Daejoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Electronic has no effect on the direction of Lake Materials i.e., Lake Materials and Daejoo Electronic go up and down completely randomly.
Pair Corralation between Lake Materials and Daejoo Electronic
Assuming the 90 days trading horizon Lake Materials Co is expected to under-perform the Daejoo Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Lake Materials Co is 1.22 times less risky than Daejoo Electronic. The stock trades about -0.08 of its potential returns per unit of risk. The Daejoo Electronic Materials is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 11,650,000 in Daejoo Electronic Materials on August 29, 2024 and sell it today you would lose (2,810,000) from holding Daejoo Electronic Materials or give up 24.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Materials Co vs. Daejoo Electronic Materials
Performance |
| Timeline |
| Lake Materials |
| Daejoo Electronic |
Lake Materials and Daejoo Electronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Materials and Daejoo Electronic
The main advantage of trading using opposite Lake Materials and Daejoo Electronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Materials position performs unexpectedly, Daejoo Electronic 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 Daejoo Electronic will offset losses from the drop in Daejoo Electronic's long position.| Lake Materials vs. Samsung Electronics Co | Lake Materials vs. Samsung Electronics Co | Lake Materials vs. LG Energy Solution | Lake Materials vs. SK Hynix |
| Daejoo Electronic vs. Korea Real Estate | Daejoo Electronic vs. Korea Ratings Co | Daejoo Electronic vs. IQuest Co | Daejoo Electronic vs. Wonbang Tech 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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