Correlation Between Dongwon System and Sungwoo Techron

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Can any of the company-specific risk be diversified away by investing in both Dongwon System and Sungwoo Techron 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 Sungwoo Techron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dongwon System and Sungwoo Techron CoLtd, you can compare the effects of market volatilities on Dongwon System and Sungwoo Techron 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 Sungwoo Techron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon System and Sungwoo Techron.

Diversification Opportunities for Dongwon System and Sungwoo Techron

0.37
  Correlation Coefficient

Weak diversification

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

Pair Corralation between Dongwon System and Sungwoo Techron

Assuming the 90 days trading horizon Dongwon System is expected to under-perform the Sungwoo Techron. In addition to that, Dongwon System is 1.46 times more volatile than Sungwoo Techron CoLtd. It trades about -0.1 of its total potential returns per unit of risk. Sungwoo Techron CoLtd is currently generating about -0.04 per unit of volatility. If you would invest  269,000  in Sungwoo Techron CoLtd on September 22, 2024 and sell it today you would lose (12,500) from holding Sungwoo Techron CoLtd or give up 4.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy97.78%
ValuesDaily Returns

Dongwon System  vs.  Sungwoo Techron CoLtd

 Performance 
       Timeline  
Dongwon System 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

0 of 100

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

Dongwon System and Sungwoo Techron Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dongwon System and Sungwoo Techron

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

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