Correlation Between DB Financial and Daihan Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both DB Financial and Daihan Pharmaceutical 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 DB Financial and Daihan Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DB Financial Investment and Daihan Pharmaceutical CoLtd, you can compare the effects of market volatilities on DB Financial and Daihan Pharmaceutical 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 DB Financial with a short position of Daihan Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and Daihan Pharmaceutical.

Diversification Opportunities for DB Financial and Daihan Pharmaceutical

-0.45

Correlation Coefficient

DB Financial  Daihan Pharmaceutical

Very good diversification

The 3 months correlation between 016610 and Daihan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Daihan Pharmaceutical CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daihan Pharmaceutical and DB Financial 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 DB Financial Investment are associated (or correlated) with Daihan Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daihan Pharmaceutical has no effect on the direction of DB Financial i.e., DB Financial and Daihan Pharmaceutical go up and down completely randomly.

Pair Corralation between DB Financial and Daihan Pharmaceutical

Assuming the 90 days trading horizon DB Financial Investment is expected to generate 1.48 times more return on investment than Daihan Pharmaceutical. However, DB Financial is 1.48 times more volatile than Daihan Pharmaceutical CoLtd. It trades about 0.15 of its potential returns per unit of risk. Daihan Pharmaceutical CoLtd is currently generating about -0.06 per unit of risk. If you would invest  540,000  in DB Financial Investment on December 24, 2024 and sell it today you would earn a total of  50,000  from holding DB Financial Investment or generate 9.26% return on investment over 90 days.

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

DB Financial Investment  vs.  Daihan Pharmaceutical CoLtd

DB Financial Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Daihan Pharmaceutical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with DB Financial and Daihan Pharmaceutical

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

The idea behind DB Financial Investment and Daihan Pharmaceutical 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.