Correlation Between ABCO Electronics and Jeong Moon

Can any of the company-specific risk be diversified away by investing in both ABCO Electronics and Jeong Moon 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 ABCO Electronics and Jeong Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ABCO Electronics Co and Jeong Moon Information, you can compare the effects of market volatilities on ABCO Electronics and Jeong Moon 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 ABCO Electronics with a short position of Jeong Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABCO Electronics and Jeong Moon.

Diversification Opportunities for ABCO Electronics and Jeong Moon

0.19

Correlation Coefficient

ABCO Electronics  Jeong Moon

Average diversification

The 3 months correlation between ABCO and Jeong is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding ABCO Electronics Co and Jeong Moon Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeong Moon Information and ABCO Electronics 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 ABCO Electronics Co are associated (or correlated) with Jeong Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeong Moon Information has no effect on the direction of ABCO Electronics i.e., ABCO Electronics and Jeong Moon go up and down completely randomly.

Pair Corralation between ABCO Electronics and Jeong Moon

Assuming the 90 days trading horizon ABCO Electronics Co is expected to generate 1.47 times more return on investment than Jeong Moon. However, ABCO Electronics is 1.47 times more volatile than Jeong Moon Information. It trades about 0.41 of its potential returns per unit of risk. Jeong Moon Information is currently generating about 0.1 per unit of risk. If you would invest  461,000  in ABCO Electronics Co on October 22, 2024 and sell it today you would earn a total of  102,000  from holding ABCO Electronics Co or generate 22.13% return on investment over 90 days.

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

ABCO Electronics Co  vs.  Jeong Moon Information

ABCO Electronics

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ABCO Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABCO Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jeong Moon Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeong Moon Information 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 ABCO Electronics and Jeong Moon

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

The idea behind ABCO Electronics Co and Jeong Moon Information 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.