Correlation Between Daesung Eltec and ABL Bio

Can any of the company-specific risk be diversified away by investing in both Daesung Eltec and ABL Bio 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 ABL Bio 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 ABL Bio, you can compare the effects of market volatilities on Daesung Eltec and ABL Bio 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 ABL Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daesung Eltec and ABL Bio.

Diversification Opportunities for Daesung Eltec and ABL Bio

0.23

Correlation Coefficient

Daesung Eltec  ABL Bio

Modest diversification

The 3 months correlation between Daesung and ABL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Eltec Co and ABL Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL Bio 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 ABL Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL Bio has no effect on the direction of Daesung Eltec i.e., Daesung Eltec and ABL Bio go up and down completely randomly.

Pair Corralation between Daesung Eltec and ABL Bio

Assuming the 90 days trading horizon Daesung Eltec Co is expected to under-perform the ABL Bio. In addition to that, Daesung Eltec is 1.21 times more volatile than ABL Bio. It trades about -0.03 of its total potential returns per unit of risk. ABL Bio is currently generating about 0.14 per unit of volatility. If you would invest  2,715,000  in ABL Bio on December 23, 2024 and sell it today you would earn a total of  985,000  from holding ABL Bio or generate 36.28% 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.  ABL Bio

Daesung Eltec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daesung Eltec 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.

ABL Bio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABL Bio are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABL Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daesung Eltec and ABL Bio

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

The idea behind Daesung Eltec Co and ABL Bio 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.