Correlation Between Daehan Synthetic and Miwon Chemical

Can any of the company-specific risk be diversified away by investing in both Daehan Synthetic and Miwon Chemical 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 Daehan Synthetic and Miwon Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daehan Synthetic Fiber and Miwon Chemical, you can compare the effects of market volatilities on Daehan Synthetic and Miwon Chemical 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 Daehan Synthetic with a short position of Miwon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daehan Synthetic and Miwon Chemical.

Diversification Opportunities for Daehan Synthetic and Miwon Chemical

-0.44

Correlation Coefficient

Daehan Synthetic  Miwon Chemical

Very good diversification

The 3 months correlation between Daehan and Miwon is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Daehan Synthetic Fiber and Miwon Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemical and Daehan Synthetic 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 Daehan Synthetic Fiber are associated (or correlated) with Miwon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemical has no effect on the direction of Daehan Synthetic i.e., Daehan Synthetic and Miwon Chemical go up and down completely randomly.

Pair Corralation between Daehan Synthetic and Miwon Chemical

Assuming the 90 days trading horizon Daehan Synthetic Fiber is expected to under-perform the Miwon Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Daehan Synthetic Fiber is 1.14 times less risky than Miwon Chemical. The stock trades about -0.16 of its potential returns per unit of risk. The Miwon Chemical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,640,255  in Miwon Chemical on December 4, 2024 and sell it today you would earn a total of  69,745  from holding Miwon Chemical or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Daehan Synthetic Fiber  vs.  Miwon Chemical

Daehan Synthetic Fiber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daehan Synthetic Fiber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Miwon Chemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Miwon Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Miwon Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daehan Synthetic and Miwon Chemical

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

The idea behind Daehan Synthetic Fiber and Miwon Chemical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.