Correlation Between Dongwon System and Nepes

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

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

Diversification Opportunities for Dongwon System and Nepes

-0.11

Correlation Coefficient

Dongwon System  Nepes

Good diversification

The 3 months correlation between Dongwon and Nepes is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and Nepes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nepes 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 Nepes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nepes has no effect on the direction of Dongwon System i.e., Dongwon System and Nepes go up and down completely randomly.

Pair Corralation between Dongwon System and Nepes

Assuming the 90 days trading horizon Dongwon System is expected to under-perform the Nepes. But the stock apears to be less risky and, when comparing its historical volatility, Dongwon System is 1.72 times less risky than Nepes. The stock trades about -0.1 of its potential returns per unit of risk. The Nepes is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  655,000  in Nepes on December 29, 2024 and sell it today you would earn a total of  48,000  from holding Nepes or generate 7.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Dongwon System  vs.  Nepes

Dongwon System

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nepes

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nepes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nepes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dongwon System and Nepes

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

The idea behind Dongwon System and Nepes 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.