Correlation Between Daelim Industrial and Korea Shipbuilding

Can any of the company-specific risk be diversified away by investing in both Daelim Industrial and Korea Shipbuilding 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 Daelim Industrial and Korea Shipbuilding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daelim Industrial Co and Korea Shipbuilding Offshore, you can compare the effects of market volatilities on Daelim Industrial and Korea Shipbuilding 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 Daelim Industrial with a short position of Korea Shipbuilding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daelim Industrial and Korea Shipbuilding.

Diversification Opportunities for Daelim Industrial and Korea Shipbuilding

-0.41

Correlation Coefficient

Daelim Industrial  Korea Shipbuilding

Very good diversification

The 3 months correlation between Daelim and Korea is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Daelim Industrial Co and Korea Shipbuilding Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Shipbuilding and Daelim Industrial 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 Daelim Industrial Co are associated (or correlated) with Korea Shipbuilding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Shipbuilding has no effect on the direction of Daelim Industrial i.e., Daelim Industrial and Korea Shipbuilding go up and down completely randomly.

Pair Corralation between Daelim Industrial and Korea Shipbuilding

Assuming the 90 days trading horizon Daelim Industrial Co is expected to under-perform the Korea Shipbuilding. But the stock apears to be less risky and, when comparing its historical volatility, Daelim Industrial Co is 1.36 times less risky than Korea Shipbuilding. The stock trades about -0.14 of its potential returns per unit of risk. The Korea Shipbuilding Offshore is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  18,050,000  in Korea Shipbuilding Offshore on September 2, 2024 and sell it today you would earn a total of  2,400,000  from holding Korea Shipbuilding Offshore or generate 13.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Daelim Industrial Co  vs.  Korea Shipbuilding Offshore

Daelim Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daelim Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Shipbuilding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Shipbuilding Offshore are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Shipbuilding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daelim Industrial and Korea Shipbuilding

The main advantage of trading using opposite Daelim Industrial and Korea Shipbuilding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daelim Industrial position performs unexpectedly, Korea Shipbuilding 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 Korea Shipbuilding will offset losses from the drop in Korea Shipbuilding's long position.

The idea behind Daelim Industrial Co and Korea Shipbuilding Offshore 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.