Correlation Between Shinsegae Engineering and Dongwoo Farm

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

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

Diversification Opportunities for Shinsegae Engineering and Dongwoo Farm

-0.52

Correlation Coefficient

Shinsegae Engineering  Dongwoo Farm

Excellent diversification

The 3 months correlation between Shinsegae and Dongwoo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shinsegae Engineering Construc and Dongwoo Farm To in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoo Farm To and Shinsegae 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 Shinsegae Engineering Construction are associated (or correlated) with Dongwoo Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoo Farm To has no effect on the direction of Shinsegae Engineering i.e., Shinsegae Engineering and Dongwoo Farm go up and down completely randomly.

Pair Corralation between Shinsegae Engineering and Dongwoo Farm

Assuming the 90 days trading horizon Shinsegae Engineering Construction is expected to generate 2.17 times more return on investment than Dongwoo Farm. However, Shinsegae Engineering is 2.17 times more volatile than Dongwoo Farm To. It trades about 0.25 of its potential returns per unit of risk. Dongwoo Farm To is currently generating about -0.13 per unit of risk. If you would invest  1,301,000  in Shinsegae Engineering Construction on September 3, 2024 and sell it today you would earn a total of  502,000  from holding Shinsegae Engineering Construction or generate 38.59% return on investment over 90 days.

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

Shinsegae Engineering Construc  vs.  Dongwoo Farm To

Shinsegae Engineering

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shinsegae Engineering Construction are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinsegae Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongwoo Farm To 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.

Pair Trading with Shinsegae Engineering and Dongwoo Farm

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

The idea behind Shinsegae Engineering Construction and Dongwoo Farm To 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.