Correlation Between Korea Shipbuilding and Dreamus

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

Diversification Opportunities for Korea Shipbuilding and Dreamus

-0.37

Correlation Coefficient

Korea Shipbuilding  Dreamus

Very good diversification

The 3 months correlation between Korea and Dreamus is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore and Dreamus Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreamus Company 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 Dreamus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreamus Company has no effect on the direction of Korea Shipbuilding i.e., Korea Shipbuilding and Dreamus go up and down completely randomly.

Pair Corralation between Korea Shipbuilding and Dreamus

Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to generate 0.71 times more return on investment than Dreamus. However, Korea Shipbuilding Offshore is 1.4 times less risky than Dreamus. It trades about 0.09 of its potential returns per unit of risk. Dreamus Company is currently generating about -0.03 per unit of risk. If you would invest  12,080,000  in Korea Shipbuilding Offshore on October 4, 2024 and sell it today you would earn a total of  11,020,000  from holding Korea Shipbuilding Offshore or generate 91.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.69%
Values	Daily Returns

Korea Shipbuilding Offshore  vs.  Dreamus Company

Korea Shipbuilding

Risk-Adjusted Performance

11 of 100

OK

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

Dreamus Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Korea Shipbuilding and Dreamus

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

The idea behind Korea Shipbuilding Offshore and Dreamus Company 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.