Correlation Between Daewon Chemical and Jeju Semiconductor

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

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

Diversification Opportunities for Daewon Chemical and Jeju Semiconductor

0.59

Correlation Coefficient

Daewon Chemical  Jeju Semiconductor

Very weak diversification

The 3 months correlation between Daewon and Jeju is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Daewon Chemical Co and Jeju Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Semiconductor Corp and Daewon 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 Daewon Chemical Co are associated (or correlated) with Jeju Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Semiconductor Corp has no effect on the direction of Daewon Chemical i.e., Daewon Chemical and Jeju Semiconductor go up and down completely randomly.

Pair Corralation between Daewon Chemical and Jeju Semiconductor

Assuming the 90 days trading horizon Daewon Chemical is expected to generate 13.82 times less return on investment than Jeju Semiconductor. But when comparing it to its historical volatility, Daewon Chemical Co is 3.61 times less risky than Jeju Semiconductor. It trades about 0.06 of its potential returns per unit of risk. Jeju Semiconductor Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  877,000  in Jeju Semiconductor Corp on October 12, 2024 and sell it today you would earn a total of  127,000  from holding Jeju Semiconductor Corp or generate 14.48% return on investment over 90 days.

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

Daewon Chemical Co  vs.  Jeju Semiconductor Corp

Daewon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daewon Chemical Co 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.

Jeju Semiconductor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeju Semiconductor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daewon Chemical and Jeju Semiconductor

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

The idea behind Daewon Chemical Co and Jeju Semiconductor 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.