Correlation Between Dawonsys CoLtd and Cheryong Electric

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

By analyzing existing cross correlation between Dawonsys CoLtd and Cheryong Electric CoLtd, you can compare the effects of market volatilities on Dawonsys CoLtd and Cheryong Electric 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 Dawonsys CoLtd with a short position of Cheryong Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dawonsys CoLtd and Cheryong Electric.

Diversification Opportunities for Dawonsys CoLtd and Cheryong Electric

0.51

Correlation Coefficient

Dawonsys CoLtd  Cheryong Electric

Very weak diversification

The 3 months correlation between Dawonsys and Cheryong is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dawonsys CoLtd and Cheryong Electric CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Electric CoLtd and Dawonsys CoLtd 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 Dawonsys CoLtd are associated (or correlated) with Cheryong Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Electric CoLtd has no effect on the direction of Dawonsys CoLtd i.e., Dawonsys CoLtd and Cheryong Electric go up and down completely randomly.

Pair Corralation between Dawonsys CoLtd and Cheryong Electric

Assuming the 90 days trading horizon Dawonsys CoLtd is expected to under-perform the Cheryong Electric. But the stock apears to be less risky and, when comparing its historical volatility, Dawonsys CoLtd is 2.41 times less risky than Cheryong Electric. The stock trades about -0.08 of its potential returns per unit of risk. The Cheryong Electric CoLtd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,202,482  in Cheryong Electric CoLtd on October 2, 2024 and sell it today you would earn a total of  2,392,518  from holding Cheryong Electric CoLtd or generate 108.63% return on investment over 90 days.

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

Dawonsys CoLtd  vs.  Cheryong Electric CoLtd

Dawonsys CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dawonsys CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cheryong Electric CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheryong Electric CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dawonsys CoLtd and Cheryong Electric

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

The idea behind Dawonsys CoLtd and Cheryong Electric CoLtd 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.