Correlation Between Celltrion and Dongbang Transport

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

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

Diversification Opportunities for Celltrion and Dongbang Transport

0.33

Correlation Coefficient

Celltrion  Dongbang Transport

Weak diversification

The 3 months correlation between Celltrion and Dongbang is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Celltrion and Dongbang Transport Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbang Transport and Celltrion 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 Celltrion are associated (or correlated) with Dongbang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbang Transport has no effect on the direction of Celltrion i.e., Celltrion and Dongbang Transport go up and down completely randomly.

Pair Corralation between Celltrion and Dongbang Transport

Assuming the 90 days trading horizon Celltrion is expected to generate 0.83 times more return on investment than Dongbang Transport. However, Celltrion is 1.21 times less risky than Dongbang Transport. It trades about -0.01 of its potential returns per unit of risk. Dongbang Transport Logistics is currently generating about -0.05 per unit of risk. If you would invest  19,016,700  in Celltrion on October 15, 2024 and sell it today you would lose (506,700) from holding Celltrion or give up 2.66% of portfolio value over 90 days.

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

Celltrion  vs.  Dongbang Transport Logistics

Celltrion

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dongbang Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongbang Transport Logistics 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.

Pair Trading with Celltrion and Dongbang Transport

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

The idea behind Celltrion and Dongbang Transport Logistics 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 Transaction History module to view history of all your transactions and understand their impact on performance.