Correlation Between System and Dongwoo Farm

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

By analyzing existing cross correlation between System and Application and Dongwoo Farm To, you can compare the effects of market volatilities on System and Dongwoo Farm 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 System with a short position of Dongwoo Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of System and Dongwoo Farm.

Diversification Opportunities for System and Dongwoo Farm

0.36

Correlation Coefficient

System  Dongwoo Farm

Weak diversification

The 3 months correlation between System and Dongwoo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding System and Application and Dongwoo Farm To in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoo Farm To and System 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 System and Application are associated (or correlated) with Dongwoo Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoo Farm To has no effect on the direction of System i.e., System and Dongwoo Farm go up and down completely randomly.

Pair Corralation between System and Dongwoo Farm

Assuming the 90 days trading horizon System and Application is expected to generate 6.61 times more return on investment than Dongwoo Farm. However, System is 6.61 times more volatile than Dongwoo Farm To. It trades about 0.14 of its potential returns per unit of risk. Dongwoo Farm To is currently generating about 0.57 per unit of risk. If you would invest  140,439  in System and Application on October 11, 2024 and sell it today you would earn a total of  15,661  from holding System and Application or generate 11.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

System and Application  vs.  Dongwoo Farm To

System and Application

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, System may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with System and Dongwoo Farm

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

The idea behind System and Application and Dongwoo Farm To 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.