Correlation Between Daol Investment and Hana Materials

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

Diversification Opportunities for Daol Investment and Hana Materials

0.21

Correlation Coefficient

Daol Investment  Hana Materials

Modest diversification

The 3 months correlation between Daol and Hana is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Daol Investment Securities and Hana Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Materials 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 Hana Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Materials has no effect on the direction of Daol Investment i.e., Daol Investment and Hana Materials go up and down completely randomly.

Pair Corralation between Daol Investment and Hana Materials

Assuming the 90 days trading horizon Daol Investment Securities is expected to generate 0.7 times more return on investment than Hana Materials. However, Daol Investment Securities is 1.43 times less risky than Hana Materials. It trades about -0.04 of its potential returns per unit of risk. Hana Materials is currently generating about -0.05 per unit of risk. If you would invest  391,370  in Daol Investment Securities on October 21, 2024 and sell it today you would lose (98,370) from holding Daol Investment Securities or give up 25.13% of portfolio value over 90 days.

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

Daol Investment Securities  vs.  Hana Materials

Daol Investment Secu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daol Investment Securities has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Hana Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daol Investment and Hana Materials

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

The idea behind Daol Investment Securities and Hana Materials 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.