Correlation Between Dongwon System and KMH Hitech

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

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

Diversification Opportunities for Dongwon System and KMH Hitech

0.42

Correlation Coefficient

Dongwon System  KMH Hitech

Very weak diversification

The 3 months correlation between Dongwon and KMH is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and KMH Hitech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KMH Hitech 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 KMH Hitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KMH Hitech has no effect on the direction of Dongwon System i.e., Dongwon System and KMH Hitech go up and down completely randomly.

Pair Corralation between Dongwon System and KMH Hitech

Assuming the 90 days trading horizon Dongwon System is expected to generate 1.63 times more return on investment than KMH Hitech. However, Dongwon System is 1.63 times more volatile than KMH Hitech Co. It trades about 0.0 of its potential returns per unit of risk. KMH Hitech Co is currently generating about -0.07 per unit of risk. If you would invest  4,145,000  in Dongwon System on September 21, 2024 and sell it today you would lose (100,000) from holding Dongwon System or give up 2.41% of portfolio value over 90 days.

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

Dongwon System  vs.  KMH Hitech Co

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 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.

KMH Hitech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KMH Hitech Co 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 KMH Hitech

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

The idea behind Dongwon System and KMH Hitech 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.