Correlation Between Daihan Pharmaceutical and Choong Ang

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

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

Diversification Opportunities for Daihan Pharmaceutical and Choong Ang

-0.31

Correlation Coefficient

Daihan Pharmaceutical  Choong Ang

Very good diversification

The 3 months correlation between Daihan and Choong is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Daihan Pharmaceutical CoLtd and Choong Ang Vaccine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choong Ang Vaccine and Daihan Pharmaceutical 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 Daihan Pharmaceutical CoLtd are associated (or correlated) with Choong Ang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choong Ang Vaccine has no effect on the direction of Daihan Pharmaceutical i.e., Daihan Pharmaceutical and Choong Ang go up and down completely randomly.

Pair Corralation between Daihan Pharmaceutical and Choong Ang

Assuming the 90 days trading horizon Daihan Pharmaceutical CoLtd is expected to generate 0.79 times more return on investment than Choong Ang. However, Daihan Pharmaceutical CoLtd is 1.27 times less risky than Choong Ang. It trades about 0.01 of its potential returns per unit of risk. Choong Ang Vaccine is currently generating about -0.05 per unit of risk. If you would invest  2,615,000  in Daihan Pharmaceutical CoLtd on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Daihan Pharmaceutical CoLtd or generate 0.0% return on investment over 90 days.

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

Daihan Pharmaceutical CoLtd  vs.  Choong Ang Vaccine

Daihan Pharmaceutical

Risk-Adjusted Performance

0 of 100

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.

Choong Ang Vaccine

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daihan Pharmaceutical and Choong Ang

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

The idea behind Daihan Pharmaceutical CoLtd and Choong Ang Vaccine 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.