Correlation Between Dongwon System and KHVATEC CoLtd

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

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

Diversification Opportunities for Dongwon System and KHVATEC CoLtd

-0.11

Correlation Coefficient

Dongwon System  KHVATEC CoLtd

Good diversification

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

Pair Corralation between Dongwon System and KHVATEC CoLtd

Assuming the 90 days trading horizon Dongwon System is expected to generate 1.59 times more return on investment than KHVATEC CoLtd. However, Dongwon System is 1.59 times more volatile than KHVATEC CoLtd. It trades about 0.04 of its potential returns per unit of risk. KHVATEC CoLtd is currently generating about -0.22 per unit of risk. If you would invest  4,075,000  in Dongwon System on September 13, 2024 and sell it today you would earn a total of  235,000  from holding Dongwon System or generate 5.77% return on investment over 90 days.

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

Dongwon System  vs.  KHVATEC CoLtd

Dongwon System

Risk-Adjusted Performance

3 of 100

Weak

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

KHVATEC CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KHVATEC CoLtd 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 System and KHVATEC CoLtd

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

The idea behind Dongwon System and KHVATEC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.