Correlation Between Top Material and Dongwon System
Can any of the company-specific risk be diversified away by investing in both Top Material and Dongwon System 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 Top Material and Dongwon System into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Top Material Co and Dongwon System, you can compare the effects of market volatilities on Top Material and Dongwon System 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 Top Material with a short position of Dongwon System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Material and Dongwon System.
Diversification Opportunities for Top Material and Dongwon System
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Top and Dongwon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System and Top Material 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 Top Material Co are associated (or correlated) with Dongwon System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon System has no effect on the direction of Top Material i.e., Top Material and Dongwon System go up and down completely randomly.
Pair Corralation between Top Material and Dongwon System
Assuming the 90 days trading horizon Top Material Co is expected to generate 1.44 times more return on investment than Dongwon System. However, Top Material is 1.44 times more volatile than Dongwon System. It trades about 0.02 of its potential returns per unit of risk. Dongwon System is currently generating about 0.02 per unit of risk. If you would invest 2,969,967 in Top Material Co on September 26, 2024 and sell it today you would lose (264,967) from holding Top Material Co or give up 8.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Top Material Co vs. Dongwon System
Performance |
| Timeline |
| Top Material |
| Dongwon System |
Top Material and Dongwon System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Top Material and Dongwon System
The main advantage of trading using opposite Top Material and Dongwon System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Material position performs unexpectedly, Dongwon System 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 Dongwon System will offset losses from the drop in Dongwon System's long position.| Top Material vs. Samsung Electronics Co | Top Material vs. Samsung Electronics Co | Top Material vs. LG Energy Solution | Top Material vs. SK Hynix |
| Dongwon System vs. BNK Financial Group | Dongwon System vs. Shinhan Financial Group | Dongwon System vs. Hana Financial | Dongwon System vs. Top Material 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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