Correlation Between Korea Shipbuilding and DreamCIS

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

Diversification Opportunities for Korea Shipbuilding and DreamCIS

0.19

Correlation Coefficient

Korea Shipbuilding  DreamCIS

Average diversification

The 3 months correlation between Korea and DreamCIS is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Korea Shipbuilding Offshore and DreamCIS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DreamCIS 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 DreamCIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DreamCIS has no effect on the direction of Korea Shipbuilding i.e., Korea Shipbuilding and DreamCIS go up and down completely randomly.

Pair Corralation between Korea Shipbuilding and DreamCIS

Assuming the 90 days trading horizon Korea Shipbuilding Offshore is expected to under-perform the DreamCIS. In addition to that, Korea Shipbuilding is 1.8 times more volatile than DreamCIS. It trades about -0.04 of its total potential returns per unit of risk. DreamCIS is currently generating about -0.06 per unit of volatility. If you would invest  295,000  in DreamCIS on December 30, 2024 and sell it today you would lose (20,000) from holding DreamCIS or give up 6.78% of portfolio value over 90 days.

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

Korea Shipbuilding Offshore  vs.  DreamCIS

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.

DreamCIS

Risk-Adjusted Performance

Very Weak

Over the last 90 days DreamCIS 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.

Pair Trading with Korea Shipbuilding and DreamCIS

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

The idea behind Korea Shipbuilding Offshore and DreamCIS 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 Managers module to screen money managers from public funds and ETFs managed around the world.