Correlation Between Dongbang Transport and Anam Electronics

Can any of the company-specific risk be diversified away by investing in both Dongbang Transport and Anam Electronics 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 Dongbang Transport and Anam Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongbang Transport Logistics and Anam Electronics Co, you can compare the effects of market volatilities on Dongbang Transport and Anam Electronics 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 Dongbang Transport with a short position of Anam Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and Anam Electronics.

Diversification Opportunities for Dongbang Transport and Anam Electronics

-0.31

Correlation Coefficient

Dongbang Transport  Anam Electronics

Very good diversification

The 3 months correlation between Dongbang and Anam is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Anam Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anam Electronics and Dongbang Transport 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 Dongbang Transport Logistics are associated (or correlated) with Anam Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anam Electronics has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Anam Electronics go up and down completely randomly.

Pair Corralation between Dongbang Transport and Anam Electronics

Assuming the 90 days trading horizon Dongbang Transport is expected to generate 21.22 times less return on investment than Anam Electronics. But when comparing it to its historical volatility, Dongbang Transport Logistics is 1.83 times less risky than Anam Electronics. It trades about 0.01 of its potential returns per unit of risk. Anam Electronics Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  117,400  in Anam Electronics Co on November 29, 2024 and sell it today you would earn a total of  48,200  from holding Anam Electronics Co or generate 41.06% return on investment over 90 days.

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

Dongbang Transport Logistics  vs.  Anam Electronics Co

Dongbang Transport

Risk-Adjusted Performance

Weak

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

Anam Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anam Electronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Anam Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongbang Transport and Anam Electronics

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

The idea behind Dongbang Transport Logistics and Anam Electronics Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.