Correlation Between Daejoo Electronic and MohenzCoLtd

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

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

Diversification Opportunities for Daejoo Electronic and MohenzCoLtd

0.22

Correlation Coefficient

Daejoo Electronic  MohenzCoLtd

Modest diversification

The 3 months correlation between Daejoo and MohenzCoLtd is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and MohenzCoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MohenzCoLtd and Daejoo Electronic 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 Daejoo Electronic Materials are associated (or correlated) with MohenzCoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MohenzCoLtd has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and MohenzCoLtd go up and down completely randomly.

Pair Corralation between Daejoo Electronic and MohenzCoLtd

Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the MohenzCoLtd. In addition to that, Daejoo Electronic is 1.01 times more volatile than MohenzCoLtd. It trades about 0.0 of its total potential returns per unit of risk. MohenzCoLtd is currently generating about 0.36 per unit of volatility. If you would invest  237,500  in MohenzCoLtd on September 16, 2024 and sell it today you would earn a total of  76,000  from holding MohenzCoLtd or generate 32.0% return on investment over 90 days.

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

Daejoo Electronic Materials  vs.  MohenzCoLtd

Daejoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejoo Electronic Materials 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.

MohenzCoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MohenzCoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MohenzCoLtd sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daejoo Electronic and MohenzCoLtd

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

The idea behind Daejoo Electronic Materials and MohenzCoLtd 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.