Correlation Between Daewon Media and Oriental Precision

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

By analyzing existing cross correlation between Daewon Media Co and Oriental Precision Engineering, you can compare the effects of market volatilities on Daewon Media and Oriental Precision 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 Daewon Media with a short position of Oriental Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewon Media and Oriental Precision.

Diversification Opportunities for Daewon Media and Oriental Precision

-0.6

Correlation Coefficient

Daewon Media  Oriental Precision

Excellent diversification

The 3 months correlation between Daewon and Oriental is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Daewon Media Co and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision and Daewon Media 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 Daewon Media Co are associated (or correlated) with Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Daewon Media i.e., Daewon Media and Oriental Precision go up and down completely randomly.

Pair Corralation between Daewon Media and Oriental Precision

Assuming the 90 days trading horizon Daewon Media Co is expected to generate 0.76 times more return on investment than Oriental Precision. However, Daewon Media Co is 1.31 times less risky than Oriental Precision. It trades about 0.3 of its potential returns per unit of risk. Oriental Precision Engineering is currently generating about 0.23 per unit of risk. If you would invest  725,442  in Daewon Media Co on October 6, 2024 and sell it today you would earn a total of  122,558  from holding Daewon Media Co or generate 16.89% return on investment over 90 days.

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

Daewon Media Co  vs.  Oriental Precision Engineering

Daewon Media

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daewon Media Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daewon Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oriental Precision

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Precision Engineering are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oriental Precision sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daewon Media and Oriental Precision

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

The idea behind Daewon Media Co and Oriental Precision Engineering 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.