Correlation Between Daewoo Electronic and Taegu Broadcasting

Can any of the company-specific risk be diversified away by investing in both Daewoo Electronic and Taegu Broadcasting 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 Daewoo Electronic and Taegu Broadcasting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daewoo Electronic Components and Taegu Broadcasting, you can compare the effects of market volatilities on Daewoo Electronic and Taegu Broadcasting 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 Daewoo Electronic with a short position of Taegu Broadcasting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo Electronic and Taegu Broadcasting.

Diversification Opportunities for Daewoo Electronic and Taegu Broadcasting

-0.5

Correlation Coefficient

Daewoo Electronic  Taegu Broadcasting

Very good diversification

The 3 months correlation between Daewoo and Taegu is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Electronic Components and Taegu Broadcasting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taegu Broadcasting and Daewoo Electronic 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 Daewoo Electronic Components are associated (or correlated) with Taegu Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taegu Broadcasting has no effect on the direction of Daewoo Electronic i.e., Daewoo Electronic and Taegu Broadcasting go up and down completely randomly.

Pair Corralation between Daewoo Electronic and Taegu Broadcasting

Assuming the 90 days trading horizon Daewoo Electronic Components is expected to under-perform the Taegu Broadcasting. In addition to that, Daewoo Electronic is 1.52 times more volatile than Taegu Broadcasting. It trades about -0.02 of its total potential returns per unit of risk. Taegu Broadcasting is currently generating about -0.02 per unit of volatility. If you would invest  108,545  in Taegu Broadcasting on October 10, 2024 and sell it today you would lose (22,045) from holding Taegu Broadcasting or give up 20.31% of portfolio value over 90 days.

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

Daewoo Electronic Components  vs.  Taegu Broadcasting

Daewoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Taegu Broadcasting

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taegu Broadcasting are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Taegu Broadcasting may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Daewoo Electronic and Taegu Broadcasting

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

The idea behind Daewoo Electronic Components and Taegu Broadcasting 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.