Correlation Between Daishin Information and Kosdaq Composite

Can any of the company-specific risk be diversified away by investing in both Daishin Information and Kosdaq Composite 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 Daishin Information and Kosdaq Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daishin Information Communications and Kosdaq Composite Index, you can compare the effects of market volatilities on Daishin Information and Kosdaq Composite 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 Daishin Information with a short position of Kosdaq Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Information and Kosdaq Composite.

Diversification Opportunities for Daishin Information and Kosdaq Composite

0.35

Correlation Coefficient

Daishin Information  Kosdaq Composite

Weak diversification

The 3 months correlation between Daishin and Kosdaq is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Information Communicat and Kosdaq Composite Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kosdaq Composite Index and Daishin Information 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 Daishin Information Communications are associated (or correlated) with Kosdaq Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kosdaq Composite Index has no effect on the direction of Daishin Information i.e., Daishin Information and Kosdaq Composite go up and down completely randomly.

Pair Corralation between Daishin Information and Kosdaq Composite

Assuming the 90 days trading horizon Daishin Information Communications is expected to generate 1.21 times more return on investment than Kosdaq Composite. However, Daishin Information is 1.21 times more volatile than Kosdaq Composite Index. It trades about 0.12 of its potential returns per unit of risk. Kosdaq Composite Index is currently generating about -0.09 per unit of risk. If you would invest  88,000  in Daishin Information Communications on September 12, 2024 and sell it today you would earn a total of  11,800  from holding Daishin Information Communications or generate 13.41% return on investment over 90 days.

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

Daishin Information Communicat  vs.  Kosdaq Composite Index

Pair Trading with Daishin Information and Kosdaq Composite

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

The idea behind Daishin Information Communications and Kosdaq Composite Index 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.