Correlation Between Dongsin Engineering and APS Holdings

Can any of the company-specific risk be diversified away by investing in both Dongsin Engineering and APS Holdings 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 Dongsin Engineering and APS Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongsin Engineering Construction and APS Holdings, you can compare the effects of market volatilities on Dongsin Engineering and APS Holdings 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 Dongsin Engineering with a short position of APS Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongsin Engineering and APS Holdings.

Diversification Opportunities for Dongsin Engineering and APS Holdings

0.25

Correlation Coefficient

Dongsin Engineering  APS Holdings

Modest diversification

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

Pair Corralation between Dongsin Engineering and APS Holdings

Assuming the 90 days trading horizon Dongsin Engineering Construction is expected to generate 3.76 times more return on investment than APS Holdings. However, Dongsin Engineering is 3.76 times more volatile than APS Holdings. It trades about 0.07 of its potential returns per unit of risk. APS Holdings is currently generating about 0.03 per unit of risk. If you would invest  1,844,000  in Dongsin Engineering Construction on September 4, 2024 and sell it today you would earn a total of  251,000  from holding Dongsin Engineering Construction or generate 13.61% return on investment over 90 days.

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

Dongsin Engineering Constructi  vs.  APS Holdings

Dongsin Engineering

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongsin Engineering Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongsin Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

APS Holdings

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APS Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, APS Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongsin Engineering and APS Holdings

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

The idea behind Dongsin Engineering Construction and APS Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.