Correlation Between Daesung Eltec and Daiyang Metal

Can any of the company-specific risk be diversified away by investing in both Daesung Eltec and Daiyang Metal 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 Daesung Eltec and Daiyang Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daesung Eltec Co and Daiyang Metal Co, you can compare the effects of market volatilities on Daesung Eltec and Daiyang Metal 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 Daesung Eltec with a short position of Daiyang Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daesung Eltec and Daiyang Metal.

Diversification Opportunities for Daesung Eltec and Daiyang Metal

0.28

Correlation Coefficient

Daesung Eltec  Daiyang Metal

Modest diversification

The 3 months correlation between Daesung and Daiyang is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Eltec Co and Daiyang Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiyang Metal and Daesung Eltec 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 Daesung Eltec Co are associated (or correlated) with Daiyang Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiyang Metal has no effect on the direction of Daesung Eltec i.e., Daesung Eltec and Daiyang Metal go up and down completely randomly.

Pair Corralation between Daesung Eltec and Daiyang Metal

Assuming the 90 days trading horizon Daesung Eltec Co is expected to generate 2.46 times more return on investment than Daiyang Metal. However, Daesung Eltec is 2.46 times more volatile than Daiyang Metal Co. It trades about 0.25 of its potential returns per unit of risk. Daiyang Metal Co is currently generating about -0.11 per unit of risk. If you would invest  82,700  in Daesung Eltec Co on October 23, 2024 and sell it today you would earn a total of  26,800  from holding Daesung Eltec Co or generate 32.41% return on investment over 90 days.

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

Daesung Eltec Co  vs.  Daiyang Metal Co

Daesung Eltec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daesung Eltec Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daesung Eltec may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Daiyang Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daesung Eltec and Daiyang Metal

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

The idea behind Daesung Eltec Co and Daiyang Metal Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.