Correlation Between DongWon Development and Dongjin Semichem

Can any of the company-specific risk be diversified away by investing in both DongWon Development and Dongjin Semichem 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 DongWon Development and Dongjin Semichem into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DongWon Development CoLtd and Dongjin Semichem Co, you can compare the effects of market volatilities on DongWon Development and Dongjin Semichem 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 DongWon Development with a short position of Dongjin Semichem. Check out your portfolio center. Please also check ongoing floating volatility patterns of DongWon Development and Dongjin Semichem.

Diversification Opportunities for DongWon Development and Dongjin Semichem

0.9

Correlation Coefficient

DongWon Development  Dongjin Semichem

Almost no diversification

The 3 months correlation between DongWon and Dongjin is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding DongWon Development CoLtd and Dongjin Semichem Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongjin Semichem and DongWon Development 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 DongWon Development CoLtd are associated (or correlated) with Dongjin Semichem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongjin Semichem has no effect on the direction of DongWon Development i.e., DongWon Development and Dongjin Semichem go up and down completely randomly.

Pair Corralation between DongWon Development and Dongjin Semichem

Assuming the 90 days trading horizon DongWon Development CoLtd is expected to generate 0.38 times more return on investment than Dongjin Semichem. However, DongWon Development CoLtd is 2.65 times less risky than Dongjin Semichem. It trades about -0.09 of its potential returns per unit of risk. Dongjin Semichem Co is currently generating about -0.14 per unit of risk. If you would invest  261,000  in DongWon Development CoLtd on September 4, 2024 and sell it today you would lose (15,000) from holding DongWon Development CoLtd or give up 5.75% of portfolio value over 90 days.

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

DongWon Development CoLtd  vs.  Dongjin Semichem Co

DongWon Development CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dongjin Semichem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongjin Semichem Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DongWon Development and Dongjin Semichem

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

The idea behind DongWon Development CoLtd and Dongjin Semichem 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.