Correlation Between DAEDUCK ELECTRONICS and Sungmoon Electronics
Can any of the company-specific risk be diversified away by investing in both DAEDUCK ELECTRONICS and Sungmoon Electronics 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 DAEDUCK ELECTRONICS and Sungmoon Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAEDUCK ELECTRONICS CoLtd and Sungmoon Electronics Co, you can compare the effects of market volatilities on DAEDUCK ELECTRONICS and Sungmoon Electronics 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 DAEDUCK ELECTRONICS with a short position of Sungmoon Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAEDUCK ELECTRONICS and Sungmoon Electronics.
Diversification Opportunities for DAEDUCK ELECTRONICS and Sungmoon Electronics
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DAEDUCK and Sungmoon is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding DAEDUCK ELECTRONICS CoLtd and Sungmoon Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sungmoon Electronics and DAEDUCK ELECTRONICS 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 DAEDUCK ELECTRONICS CoLtd are associated (or correlated) with Sungmoon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sungmoon Electronics has no effect on the direction of DAEDUCK ELECTRONICS i.e., DAEDUCK ELECTRONICS and Sungmoon Electronics go up and down completely randomly.
Pair Corralation between DAEDUCK ELECTRONICS and Sungmoon Electronics
Assuming the 90 days trading horizon DAEDUCK ELECTRONICS CoLtd is expected to generate 0.55 times more return on investment than Sungmoon Electronics. However, DAEDUCK ELECTRONICS CoLtd is 1.81 times less risky than Sungmoon Electronics. It trades about 0.13 of its potential returns per unit of risk. Sungmoon Electronics Co is currently generating about -0.37 per unit of risk. If you would invest 798,000 in DAEDUCK ELECTRONICS CoLtd on August 28, 2024 and sell it today you would earn a total of 33,000 from holding DAEDUCK ELECTRONICS CoLtd or generate 4.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAEDUCK ELECTRONICS CoLtd vs. Sungmoon Electronics Co
Performance |
| Timeline |
| DAEDUCK ELECTRONICS CoLtd |
| Sungmoon Electronics |
DAEDUCK ELECTRONICS and Sungmoon Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAEDUCK ELECTRONICS and Sungmoon Electronics
The main advantage of trading using opposite DAEDUCK ELECTRONICS and Sungmoon Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAEDUCK ELECTRONICS position performs unexpectedly, Sungmoon Electronics 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 Sungmoon Electronics will offset losses from the drop in Sungmoon Electronics' long position.The idea behind DAEDUCK ELECTRONICS CoLtd and Sungmoon Electronics Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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