Correlation Between Dongbang Transport and Iljin Display

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

Diversification Opportunities for Dongbang Transport and Iljin Display

0.91

Correlation Coefficient

Dongbang Transport  Iljin Display

Almost no diversification

The 3 months correlation between Dongbang and Iljin is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Iljin Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iljin Display 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 Iljin Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iljin Display has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Iljin Display go up and down completely randomly.

Pair Corralation between Dongbang Transport and Iljin Display

Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to generate 1.07 times more return on investment than Iljin Display. However, Dongbang Transport is 1.07 times more volatile than Iljin Display. It trades about 0.01 of its potential returns per unit of risk. Iljin Display is currently generating about -0.01 per unit of risk. If you would invest  255,500  in Dongbang Transport Logistics on October 10, 2024 and sell it today you would lose (30,000) from holding Dongbang Transport Logistics or give up 11.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Dongbang Transport Logistics  vs.  Iljin Display

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.

Iljin Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iljin Display 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 Iljin Display

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

The idea behind Dongbang Transport Logistics and Iljin Display 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.