Correlation Between DAEDUCK ELECTRONICS and SBI Investment
Can any of the company-specific risk be diversified away by investing in both DAEDUCK ELECTRONICS and SBI Investment 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 SBI Investment 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 SBI Investment KOREA, you can compare the effects of market volatilities on DAEDUCK ELECTRONICS and SBI Investment 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 SBI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAEDUCK ELECTRONICS and SBI Investment.
Diversification Opportunities for DAEDUCK ELECTRONICS and SBI Investment
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DAEDUCK and SBI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding DAEDUCK ELECTRONICS CoLtd and SBI Investment KOREA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Investment KOREA 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 SBI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Investment KOREA has no effect on the direction of DAEDUCK ELECTRONICS i.e., DAEDUCK ELECTRONICS and SBI Investment go up and down completely randomly.
Pair Corralation between DAEDUCK ELECTRONICS and SBI Investment
Assuming the 90 days trading horizon DAEDUCK ELECTRONICS CoLtd is expected to under-perform the SBI Investment. But the stock apears to be less risky and, when comparing its historical volatility, DAEDUCK ELECTRONICS CoLtd is 1.86 times less risky than SBI Investment. The stock trades about -0.02 of its potential returns per unit of risk. The SBI Investment KOREA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 74,900 in SBI Investment KOREA on September 1, 2024 and sell it today you would lose (2,000) from holding SBI Investment KOREA or give up 2.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAEDUCK ELECTRONICS CoLtd vs. SBI Investment KOREA
Performance |
| Timeline |
| DAEDUCK ELECTRONICS CoLtd |
| SBI Investment KOREA |
DAEDUCK ELECTRONICS and SBI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAEDUCK ELECTRONICS and SBI Investment
The main advantage of trading using opposite DAEDUCK ELECTRONICS and SBI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAEDUCK ELECTRONICS position performs unexpectedly, SBI Investment 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 SBI Investment will offset losses from the drop in SBI Investment's long position.The idea behind DAEDUCK ELECTRONICS CoLtd and SBI Investment KOREA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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