Correlation Between Korea Shipbuilding and Daol Investment

Can any of the company-specific risk be diversified away by investing in both Korea Shipbuilding and Daol Investment 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 Korea Shipbuilding and Daol Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Korea Shipbuilding Offshore and Daol Investment Securities, you can compare the effects of market volatilities on Korea Shipbuilding and Daol Investment 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 Korea Shipbuilding with a short position of Daol Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Shipbuilding and Daol Investment.

Diversification Opportunities for Korea Shipbuilding and Daol Investment

-0.21

Correlation Coefficient

Korea Shipbuilding  Daol Investment

Very good diversification

The 3 months correlation between Korea and Daol is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore and Daol Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daol Investment Secu and Korea Shipbuilding 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 Korea Shipbuilding Offshore are associated (or correlated) with Daol Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daol Investment Secu has no effect on the direction of Korea Shipbuilding i.e., Korea Shipbuilding and Daol Investment go up and down completely randomly.

Pair Corralation between Korea Shipbuilding and Daol Investment

Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to under-perform the Daol Investment. In addition to that, Korea Shipbuilding is 1.48 times more volatile than Daol Investment Securities. It trades about -0.04 of its total potential returns per unit of risk. Daol Investment Securities is currently generating about 0.13 per unit of volatility. If you would invest  298,619  in Daol Investment Securities on December 30, 2024 and sell it today you would earn a total of  48,381  from holding Daol Investment Securities or generate 16.2% return on investment over 90 days.

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

Korea Shipbuilding Offshore  vs.  Daol Investment Securities

Korea Shipbuilding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Korea Shipbuilding Offshore 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.

Daol Investment Secu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daol Investment Securities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daol Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Korea Shipbuilding and Daol Investment

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

The idea behind Korea Shipbuilding Offshore and Daol Investment Securities 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.