Correlation Between Dongbang Transport and Cheryong Industrial

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

Diversification Opportunities for Dongbang Transport and Cheryong Industrial

0.25

Correlation Coefficient

Dongbang Transport  Cheryong Industrial

Modest diversification

The 3 months correlation between Dongbang and Cheryong is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Cheryong Industrial CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Industrial CoLtd 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 Cheryong Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Industrial CoLtd has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Cheryong Industrial go up and down completely randomly.

Pair Corralation between Dongbang Transport and Cheryong Industrial

Assuming the 90 days trading horizon Dongbang Transport Logistics is expected to generate 0.83 times more return on investment than Cheryong Industrial. However, Dongbang Transport Logistics is 1.2 times less risky than Cheryong Industrial. It trades about 0.11 of its potential returns per unit of risk. Cheryong Industrial CoLtd is currently generating about 0.02 per unit of risk. If you would invest  215,500  in Dongbang Transport Logistics on November 29, 2024 and sell it today you would earn a total of  11,000  from holding Dongbang Transport Logistics or generate 5.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Dongbang Transport Logistics  vs.  Cheryong Industrial CoLtd

Dongbang Transport

Risk-Adjusted Performance

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 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.

Cheryong Industrial CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheryong Industrial CoLtd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cheryong Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongbang Transport and Cheryong Industrial

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

The idea behind Dongbang Transport Logistics and Cheryong Industrial CoLtd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.