Correlation Between Daewoo Electronic and Pan Entertainment

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

Diversification Opportunities for Daewoo Electronic and Pan Entertainment

0.45

Correlation Coefficient

Daewoo Electronic  Pan Entertainment

Very weak diversification

The 3 months correlation between Daewoo and Pan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Electronic Components and Pan Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Entertainment 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 Pan Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Entertainment has no effect on the direction of Daewoo Electronic i.e., Daewoo Electronic and Pan Entertainment go up and down completely randomly.

Pair Corralation between Daewoo Electronic and Pan Entertainment

Assuming the 90 days trading horizon Daewoo Electronic is expected to generate 88.8 times less return on investment than Pan Entertainment. But when comparing it to its historical volatility, Daewoo Electronic Components is 6.36 times less risky than Pan Entertainment. It trades about 0.01 of its potential returns per unit of risk. Pan Entertainment Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  219,000  in Pan Entertainment Co on December 23, 2024 and sell it today you would earn a total of  90,000  from holding Pan Entertainment Co or generate 41.1% return on investment over 90 days.

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

Daewoo Electronic Components  vs.  Pan Entertainment Co

Daewoo Electronic

Risk-Adjusted Performance

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.

Pan Entertainment

Risk-Adjusted Performance

Good

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

Pair Trading with Daewoo Electronic and Pan Entertainment

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

The idea behind Daewoo Electronic Components and Pan Entertainment 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.