Correlation Between Dongwon System and Jeju Semiconductor

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

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

Diversification Opportunities for Dongwon System and Jeju Semiconductor

-0.73

Correlation Coefficient

Dongwon System  Jeju Semiconductor

Pay attention - limited upside

The 3 months correlation between Dongwon and Jeju is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and Jeju Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Semiconductor Corp 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 Jeju Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Semiconductor Corp has no effect on the direction of Dongwon System i.e., Dongwon System and Jeju Semiconductor go up and down completely randomly.

Pair Corralation between Dongwon System and Jeju Semiconductor

Assuming the 90 days trading horizon Dongwon System is expected to under-perform the Jeju Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Dongwon System is 2.17 times less risky than Jeju Semiconductor. The stock trades about -0.09 of its potential returns per unit of risk. The Jeju Semiconductor Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  865,000  in Jeju Semiconductor Corp on December 2, 2024 and sell it today you would earn a total of  701,000  from holding Jeju Semiconductor Corp or generate 81.04% return on investment over 90 days.

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

Dongwon System  vs.  Jeju Semiconductor Corp

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.

Jeju Semiconductor Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Semiconductor Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongwon System and Jeju Semiconductor

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

The idea behind Dongwon System and Jeju Semiconductor Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.