Correlation Between DIO and Celltrion Pharm

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

By analyzing existing cross correlation between DIO Corporation and Celltrion Pharm, you can compare the effects of market volatilities on DIO and Celltrion Pharm 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 DIO with a short position of Celltrion Pharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIO and Celltrion Pharm.

Diversification Opportunities for DIO and Celltrion Pharm

0.09

Correlation Coefficient

DIO  Celltrion Pharm

Significant diversification

The 3 months correlation between DIO and Celltrion is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding DIO Corp. and Celltrion Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celltrion Pharm and DIO 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 DIO Corporation are associated (or correlated) with Celltrion Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celltrion Pharm has no effect on the direction of DIO i.e., DIO and Celltrion Pharm go up and down completely randomly.

Pair Corralation between DIO and Celltrion Pharm

Assuming the 90 days trading horizon DIO Corporation is expected to generate 0.78 times more return on investment than Celltrion Pharm. However, DIO Corporation is 1.29 times less risky than Celltrion Pharm. It trades about -0.04 of its potential returns per unit of risk. Celltrion Pharm is currently generating about -0.09 per unit of risk. If you would invest  1,922,000  in DIO Corporation on September 22, 2024 and sell it today you would lose (297,000) from holding DIO Corporation or give up 15.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

DIO Corp.  vs.  Celltrion Pharm

DIO Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Celltrion Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celltrion Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DIO and Celltrion Pharm

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

The idea behind DIO Corporation and Celltrion Pharm 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.