Correlation Between Dongwon System and Puloon Technology

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

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

Diversification Opportunities for Dongwon System and Puloon Technology

-0.53

Correlation Coefficient

Dongwon System  Puloon Technology

Excellent diversification

The 3 months correlation between Dongwon and Puloon is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and Puloon Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Puloon Technology 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 Puloon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Puloon Technology has no effect on the direction of Dongwon System i.e., Dongwon System and Puloon Technology go up and down completely randomly.

Pair Corralation between Dongwon System and Puloon Technology

Assuming the 90 days trading horizon Dongwon System is expected to generate 1.46 times more return on investment than Puloon Technology. However, Dongwon System is 1.46 times more volatile than Puloon Technology. It trades about 0.12 of its potential returns per unit of risk. Puloon Technology is currently generating about -0.22 per unit of risk. If you would invest  3,535,000  in Dongwon System on December 9, 2024 and sell it today you would earn a total of  180,000  from holding Dongwon System or generate 5.09% return on investment over 90 days.

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

Dongwon System  vs.  Puloon Technology

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 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.

Puloon Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Puloon Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Puloon Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongwon System and Puloon Technology

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

The idea behind Dongwon System and Puloon Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.