Correlation Between Shinil Industrial and Dongwon System

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

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

Diversification Opportunities for Shinil Industrial and Dongwon System

0.35

Correlation Coefficient

Shinil Industrial  Dongwon System

Weak diversification

The 3 months correlation between Shinil and Dongwon is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shinil Industrial Co and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System and Shinil 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 Shinil Industrial 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 Shinil Industrial i.e., Shinil Industrial and Dongwon System go up and down completely randomly.

Pair Corralation between Shinil Industrial and Dongwon System

Assuming the 90 days trading horizon Shinil Industrial Co is expected to under-perform the Dongwon System. But the stock apears to be less risky and, when comparing its historical volatility, Shinil Industrial Co is 2.76 times less risky than Dongwon System. The stock trades about -0.05 of its potential returns per unit of risk. The Dongwon System is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,191,284  in Dongwon System on October 4, 2024 and sell it today you would earn a total of  768,716  from holding Dongwon System or generate 24.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.69%
Values	Daily Returns

Shinil Industrial Co  vs.  Dongwon System

Shinil Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinil Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinil Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dongwon System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongwon System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongwon System is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shinil Industrial and Dongwon System

The main advantage of trading using opposite Shinil Industrial and Dongwon System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinil Industrial 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.

The idea behind Shinil Industrial Co and Dongwon System 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 Transaction History module to view history of all your transactions and understand their impact on performance.