Correlation Between Genie Music and Dongbang Transport

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

By analyzing existing cross correlation between Genie Music and Dongbang Transport Logistics, you can compare the effects of market volatilities on Genie Music and Dongbang Transport 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 Genie Music with a short position of Dongbang Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genie Music and Dongbang Transport.

Diversification Opportunities for Genie Music and Dongbang Transport

0.16

Correlation Coefficient

Genie Music  Dongbang Transport

Average diversification

The 3 months correlation between Genie and Dongbang is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Genie Music and Dongbang Transport Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbang Transport and Genie Music 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 Genie Music are associated (or correlated) with Dongbang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbang Transport has no effect on the direction of Genie Music i.e., Genie Music and Dongbang Transport go up and down completely randomly.

Pair Corralation between Genie Music and Dongbang Transport

Assuming the 90 days trading horizon Genie Music is expected to under-perform the Dongbang Transport. But the stock apears to be less risky and, when comparing its historical volatility, Genie Music is 1.13 times less risky than Dongbang Transport. The stock trades about -0.09 of its potential returns per unit of risk. The Dongbang Transport Logistics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  218,000  in Dongbang Transport Logistics on December 23, 2024 and sell it today you would earn a total of  4,000  from holding Dongbang Transport Logistics or generate 1.83% return on investment over 90 days.

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

Genie Music  vs.  Dongbang Transport Logistics

Genie Music

Risk-Adjusted Performance

Very Weak

Over the last 90 days Genie Music 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.

Dongbang Transport

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Transport Logistics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongbang Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Genie Music and Dongbang Transport

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

The idea behind Genie Music and Dongbang Transport Logistics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.