Correlation Between Namyang Dairy and Dong Il

Can any of the company-specific risk be diversified away by investing in both Namyang Dairy and Dong Il 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 Namyang Dairy and Dong Il into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Namyang Dairy and Dong Il Corp, you can compare the effects of market volatilities on Namyang Dairy and Dong Il 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 Namyang Dairy with a short position of Dong Il. Check out your portfolio center. Please also check ongoing floating volatility patterns of Namyang Dairy and Dong Il.

Diversification Opportunities for Namyang Dairy and Dong Il

-0.07

Correlation Coefficient

Namyang Dairy  Dong Il

Good diversification

The 3 months correlation between Namyang and Dong is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Namyang Dairy and Dong Il Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Il Corp and Namyang Dairy 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 Namyang Dairy are associated (or correlated) with Dong Il. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Il Corp has no effect on the direction of Namyang Dairy i.e., Namyang Dairy and Dong Il go up and down completely randomly.

Pair Corralation between Namyang Dairy and Dong Il

Assuming the 90 days trading horizon Namyang Dairy is expected to generate 20.02 times more return on investment than Dong Il. However, Namyang Dairy is 20.02 times more volatile than Dong Il Corp. It trades about 0.06 of its potential returns per unit of risk. Dong Il Corp is currently generating about 0.11 per unit of risk. If you would invest  4,397,418  in Namyang Dairy on September 28, 2024 and sell it today you would earn a total of  1,452,582  from holding Namyang Dairy or generate 33.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.09%
Values	Daily Returns

Namyang Dairy  vs.  Dong Il Corp

Namyang Dairy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Namyang Dairy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Namyang Dairy sustained solid returns over the last few months and may actually be approaching a breakup point.

Dong Il Corp

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dong Il Corp are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dong Il sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Namyang Dairy and Dong Il

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

The idea behind Namyang Dairy and Dong Il Corp 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..