Correlation Between Dongnam Chemical and Samick Musical

Can any of the company-specific risk be diversified away by investing in both Dongnam Chemical and Samick Musical 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 Dongnam Chemical and Samick Musical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongnam Chemical Co and Samick Musical Instruments, you can compare the effects of market volatilities on Dongnam Chemical and Samick Musical 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 Dongnam Chemical with a short position of Samick Musical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongnam Chemical and Samick Musical.

Diversification Opportunities for Dongnam Chemical and Samick Musical

0.25

Correlation Coefficient

Dongnam Chemical  Samick Musical

Modest diversification

The 3 months correlation between Dongnam and Samick is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dongnam Chemical Co and Samick Musical Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samick Musical Instr and Dongnam Chemical 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 Dongnam Chemical Co are associated (or correlated) with Samick Musical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samick Musical Instr has no effect on the direction of Dongnam Chemical i.e., Dongnam Chemical and Samick Musical go up and down completely randomly.

Pair Corralation between Dongnam Chemical and Samick Musical

Assuming the 90 days trading horizon Dongnam Chemical Co is expected to under-perform the Samick Musical. In addition to that, Dongnam Chemical is 1.08 times more volatile than Samick Musical Instruments. It trades about -0.05 of its total potential returns per unit of risk. Samick Musical Instruments is currently generating about 0.0 per unit of volatility. If you would invest  119,838  in Samick Musical Instruments on October 11, 2024 and sell it today you would lose (3,738) from holding Samick Musical Instruments or give up 3.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Dongnam Chemical Co  vs.  Samick Musical Instruments

Dongnam Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongnam Chemical Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongnam Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Samick Musical Instr

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samick Musical Instruments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Samick Musical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dongnam Chemical and Samick Musical

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

The idea behind Dongnam Chemical Co and Samick Musical Instruments 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.