Correlation Between INSUN Environmental and Daechang Steel

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

By analyzing existing cross correlation between INSUN Environmental New and Daechang Steel Co, you can compare the effects of market volatilities on INSUN Environmental and Daechang Steel 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 INSUN Environmental with a short position of Daechang Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of INSUN Environmental and Daechang Steel.

Diversification Opportunities for INSUN Environmental and Daechang Steel

0.71

Correlation Coefficient

INSUN Environmental  Daechang Steel

Poor diversification

The 3 months correlation between INSUN and Daechang is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding INSUN Environmental New and Daechang Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daechang Steel and INSUN Environmental 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 INSUN Environmental New are associated (or correlated) with Daechang Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daechang Steel has no effect on the direction of INSUN Environmental i.e., INSUN Environmental and Daechang Steel go up and down completely randomly.

Pair Corralation between INSUN Environmental and Daechang Steel

Assuming the 90 days trading horizon INSUN Environmental New is expected to generate 2.14 times more return on investment than Daechang Steel. However, INSUN Environmental is 2.14 times more volatile than Daechang Steel Co. It trades about 0.13 of its potential returns per unit of risk. Daechang Steel Co is currently generating about -0.08 per unit of risk. If you would invest  498,000  in INSUN Environmental New on September 21, 2024 and sell it today you would earn a total of  47,000  from holding INSUN Environmental New or generate 9.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

INSUN Environmental New  vs.  Daechang Steel Co

INSUN Environmental New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INSUN Environmental New 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.

Daechang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with INSUN Environmental and Daechang Steel

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

The idea behind INSUN Environmental New and Daechang Steel 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..