Correlation Between Geumhwa Plant and DongWon Development

Can any of the company-specific risk be diversified away by investing in both Geumhwa Plant and DongWon Development 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 Geumhwa Plant and DongWon Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Geumhwa Plant Service and DongWon Development CoLtd, you can compare the effects of market volatilities on Geumhwa Plant and DongWon Development 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 Geumhwa Plant with a short position of DongWon Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geumhwa Plant and DongWon Development.

Diversification Opportunities for Geumhwa Plant and DongWon Development

-0.17

Correlation Coefficient

Geumhwa Plant  DongWon Development

Good diversification

The 3 months correlation between Geumhwa and DongWon is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Geumhwa Plant Service and DongWon Development CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DongWon Development CoLtd and Geumhwa Plant 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 Geumhwa Plant Service are associated (or correlated) with DongWon Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DongWon Development CoLtd has no effect on the direction of Geumhwa Plant i.e., Geumhwa Plant and DongWon Development go up and down completely randomly.

Pair Corralation between Geumhwa Plant and DongWon Development

Assuming the 90 days trading horizon Geumhwa Plant Service is expected to generate 0.91 times more return on investment than DongWon Development. However, Geumhwa Plant Service is 1.1 times less risky than DongWon Development. It trades about 0.09 of its potential returns per unit of risk. DongWon Development CoLtd is currently generating about 0.04 per unit of risk. If you would invest  2,381,788  in Geumhwa Plant Service on December 2, 2024 and sell it today you would earn a total of  128,212  from holding Geumhwa Plant Service or generate 5.38% return on investment over 90 days.

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

Geumhwa Plant Service  vs.  DongWon Development CoLtd

Geumhwa Plant Service

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geumhwa Plant Service are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Geumhwa Plant is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DongWon Development CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DongWon Development CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DongWon Development is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Geumhwa Plant and DongWon Development

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

The idea behind Geumhwa Plant Service and DongWon Development CoLtd 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.