Correlation Between Dongbang Transport and CJ Seafood

Can any of the company-specific risk be diversified away by investing in both Dongbang Transport and CJ Seafood 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 CJ Seafood 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 CJ Seafood Corp, you can compare the effects of market volatilities on Dongbang Transport and CJ Seafood 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 CJ Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and CJ Seafood.

Diversification Opportunities for Dongbang Transport and CJ Seafood

0.85

Correlation Coefficient

Dongbang Transport  CJ Seafood

Very poor diversification

The 3 months correlation between Dongbang and 011150 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and CJ Seafood Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CJ Seafood Corp 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 CJ Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CJ Seafood Corp has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and CJ Seafood go up and down completely randomly.

Pair Corralation between Dongbang Transport and CJ Seafood

Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to under-perform the CJ Seafood. But the stock apears to be less risky and, when comparing its historical volatility, Dongbang Transport Logistics is 1.06 times less risky than CJ Seafood. The stock trades about -0.1 of its potential returns per unit of risk. The CJ Seafood Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  337,000  in CJ Seafood Corp on October 7, 2024 and sell it today you would lose (37,500) from holding CJ Seafood Corp or give up 11.13% of portfolio value over 90 days.

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

Dongbang Transport Logistics  vs.  CJ Seafood Corp

Dongbang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongbang Transport Logistics 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CJ Seafood Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CJ Seafood Corp 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.

Pair Trading with Dongbang Transport and CJ Seafood

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

The idea behind Dongbang Transport Logistics and CJ Seafood 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.