Correlation Between Wonbang Tech and Daesung Eltec

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

By analyzing existing cross correlation between Wonbang Tech Co and Daesung Eltec Co, you can compare the effects of market volatilities on Wonbang Tech and Daesung Eltec 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 Wonbang Tech with a short position of Daesung Eltec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wonbang Tech and Daesung Eltec.

Diversification Opportunities for Wonbang Tech and Daesung Eltec

0.69

Correlation Coefficient

Wonbang Tech  Daesung Eltec

Poor diversification

The 3 months correlation between Wonbang and Daesung is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Wonbang Tech Co and Daesung Eltec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Eltec and Wonbang Tech 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 Wonbang Tech Co are associated (or correlated) with Daesung Eltec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Eltec has no effect on the direction of Wonbang Tech i.e., Wonbang Tech and Daesung Eltec go up and down completely randomly.

Pair Corralation between Wonbang Tech and Daesung Eltec

Assuming the 90 days trading horizon Wonbang Tech Co is expected to under-perform the Daesung Eltec. But the stock apears to be less risky and, when comparing its historical volatility, Wonbang Tech Co is 1.94 times less risky than Daesung Eltec. The stock trades about -0.03 of its potential returns per unit of risk. The Daesung Eltec Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  107,500  in Daesung Eltec Co on October 23, 2024 and sell it today you would earn a total of  2,000  from holding Daesung Eltec Co or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	78.69%
Values	Daily Returns

Wonbang Tech Co  vs.  Daesung Eltec Co

Wonbang Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daesung Eltec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daesung Eltec Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daesung Eltec may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wonbang Tech and Daesung Eltec

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

The idea behind Wonbang Tech Co and Daesung Eltec Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.