Correlation Between DB Financial and Hyosung Chemical

Can any of the company-specific risk be diversified away by investing in both DB Financial and Hyosung Chemical 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 Hyosung Chemical 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 Hyosung Chemical Corp, you can compare the effects of market volatilities on DB Financial and Hyosung Chemical 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 Hyosung Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and Hyosung Chemical.

Diversification Opportunities for DB Financial and Hyosung Chemical

0.74

Correlation Coefficient

DB Financial  Hyosung Chemical

Poor diversification

The 3 months correlation between 016610 and Hyosung is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Hyosung Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyosung Chemical Corp 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 Hyosung Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyosung Chemical Corp has no effect on the direction of DB Financial i.e., DB Financial and Hyosung Chemical go up and down completely randomly.

Pair Corralation between DB Financial and Hyosung Chemical

Assuming the 90 days trading horizon DB Financial is expected to generate 11.92 times less return on investment than Hyosung Chemical. But when comparing it to its historical volatility, DB Financial Investment is 3.66 times less risky than Hyosung Chemical. It trades about 0.06 of its potential returns per unit of risk. Hyosung Chemical Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,350,000  in Hyosung Chemical Corp on October 8, 2024 and sell it today you would earn a total of  665,000  from holding Hyosung Chemical Corp or generate 19.85% return on investment over 90 days.

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

DB Financial Investment  vs.  Hyosung Chemical Corp

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment 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.

Hyosung Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyosung Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hyosung Chemical 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 Hyosung Chemical

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

The idea behind DB Financial Investment and Hyosung Chemical 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.