Correlation Between Dongwon System and Tae Kyung

Can any of the company-specific risk be diversified away by investing in both Dongwon System and Tae Kyung 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 System and Tae Kyung into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongwon System and Tae Kyung Chemical, you can compare the effects of market volatilities on Dongwon System and Tae Kyung 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 System with a short position of Tae Kyung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon System and Tae Kyung.

Diversification Opportunities for Dongwon System and Tae Kyung

0.24

Correlation Coefficient

Dongwon System  Tae Kyung

Modest diversification

The 3 months correlation between Dongwon and Tae is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and Tae Kyung Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tae Kyung Chemical and Dongwon System 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 System are associated (or correlated) with Tae Kyung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tae Kyung Chemical has no effect on the direction of Dongwon System i.e., Dongwon System and Tae Kyung go up and down completely randomly.

Pair Corralation between Dongwon System and Tae Kyung

Assuming the 90 days trading horizon Dongwon System is expected to under-perform the Tae Kyung. In addition to that, Dongwon System is 1.17 times more volatile than Tae Kyung Chemical. It trades about -0.01 of its total potential returns per unit of risk. Tae Kyung Chemical is currently generating about 0.08 per unit of volatility. If you would invest  1,023,606  in Tae Kyung Chemical on October 11, 2024 and sell it today you would earn a total of  31,394  from holding Tae Kyung Chemical or generate 3.07% return on investment over 90 days.

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

Dongwon System  vs.  Tae Kyung Chemical

Dongwon System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongwon System 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tae Kyung Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tae Kyung Chemical 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 Dongwon System and Tae Kyung

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

The idea behind Dongwon System and Tae Kyung Chemical 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.