Correlation Between Daol Investment and Kolon Life

Can any of the company-specific risk be diversified away by investing in both Daol Investment and Kolon Life 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 Daol Investment and Kolon Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daol Investment Securities and Kolon Life Science, you can compare the effects of market volatilities on Daol Investment and Kolon Life 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 Daol Investment with a short position of Kolon Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daol Investment and Kolon Life.

Diversification Opportunities for Daol Investment and Kolon Life

0.45

Correlation Coefficient

Daol Investment  Kolon Life

Very weak diversification

The 3 months correlation between Daol and Kolon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Daol Investment Securities and Kolon Life Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Life Science and Daol Investment 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 Daol Investment Securities are associated (or correlated) with Kolon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Life Science has no effect on the direction of Daol Investment i.e., Daol Investment and Kolon Life go up and down completely randomly.

Pair Corralation between Daol Investment and Kolon Life

Assuming the 90 days trading horizon Daol Investment Securities is expected to generate 1.05 times more return on investment than Kolon Life. However, Daol Investment is 1.05 times more volatile than Kolon Life Science. It trades about 0.01 of its potential returns per unit of risk. Kolon Life Science is currently generating about -0.01 per unit of risk. If you would invest  314,630  in Daol Investment Securities on October 11, 2024 and sell it today you would lose (14,130) from holding Daol Investment Securities or give up 4.49% of portfolio value over 90 days.

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

Daol Investment Securities  vs.  Kolon Life Science

Daol Investment Secu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daol Investment Securities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daol Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kolon Life Science

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kolon Life Science are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kolon Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daol Investment and Kolon Life

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

The idea behind Daol Investment Securities and Kolon Life Science 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.