Correlation Between Polaris Office and Daewoo Electronic

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

By analyzing existing cross correlation between Polaris Office Corp and Daewoo Electronic Components, you can compare the effects of market volatilities on Polaris Office and Daewoo Electronic 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 Polaris Office with a short position of Daewoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polaris Office and Daewoo Electronic.

Diversification Opportunities for Polaris Office and Daewoo Electronic

-0.46

Correlation Coefficient

Polaris Office  Daewoo Electronic

Very good diversification

The 3 months correlation between Polaris and Daewoo is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Office Corp and Daewoo Electronic Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Electronic and Polaris Office 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 Polaris Office Corp are associated (or correlated) with Daewoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Electronic has no effect on the direction of Polaris Office i.e., Polaris Office and Daewoo Electronic go up and down completely randomly.

Pair Corralation between Polaris Office and Daewoo Electronic

Assuming the 90 days trading horizon Polaris Office is expected to generate 1.21 times less return on investment than Daewoo Electronic. In addition to that, Polaris Office is 6.79 times more volatile than Daewoo Electronic Components. It trades about 0.01 of its total potential returns per unit of risk. Daewoo Electronic Components is currently generating about 0.09 per unit of volatility. If you would invest  100,500  in Daewoo Electronic Components on October 27, 2024 and sell it today you would earn a total of  1,000.00  from holding Daewoo Electronic Components or generate 1.0% return on investment over 90 days.

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

Polaris Office Corp  vs.  Daewoo Electronic Components

Polaris Office Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Office Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Polaris Office sustained solid returns over the last few months and may actually be approaching a breakup point.

Daewoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daewoo Electronic Components 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 Polaris Office and Daewoo Electronic

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

The idea behind Polaris Office Corp and Daewoo Electronic Components 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.