Correlation Between Jinro Distillers and DongWon Development

Can any of the company-specific risk be diversified away by investing in both Jinro Distillers and DongWon Development 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 Jinro Distillers and DongWon Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jinro Distillers Co and DongWon Development CoLtd, you can compare the effects of market volatilities on Jinro Distillers and DongWon Development 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 Jinro Distillers with a short position of DongWon Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinro Distillers and DongWon Development.

Diversification Opportunities for Jinro Distillers and DongWon Development

-0.04

Correlation Coefficient

Jinro Distillers  DongWon Development

Good diversification

The 3 months correlation between Jinro and DongWon is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jinro Distillers Co and DongWon Development CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DongWon Development CoLtd and Jinro Distillers 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 Jinro Distillers Co are associated (or correlated) with DongWon Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DongWon Development CoLtd has no effect on the direction of Jinro Distillers i.e., Jinro Distillers and DongWon Development go up and down completely randomly.

Pair Corralation between Jinro Distillers and DongWon Development

Assuming the 90 days trading horizon Jinro Distillers Co is expected to generate 0.67 times more return on investment than DongWon Development. However, Jinro Distillers Co is 1.49 times less risky than DongWon Development. It trades about 0.04 of its potential returns per unit of risk. DongWon Development CoLtd is currently generating about -0.06 per unit of risk. If you would invest  1,551,056  in Jinro Distillers Co on September 4, 2024 and sell it today you would earn a total of  134,944  from holding Jinro Distillers Co or generate 8.7% return on investment over 90 days.

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

Jinro Distillers Co  vs.  DongWon Development CoLtd

Jinro Distillers

Risk-Adjusted Performance

0 of 100

Very Weak

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

DongWon Development CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Jinro Distillers and DongWon Development

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

The idea behind Jinro Distillers Co and DongWon Development 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.