Correlation Between Daejoo Electronic and Daeduck Electronics

Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and Daeduck Electronics 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 Daeduck Electronics 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 Daeduck Electronics Co, you can compare the effects of market volatilities on Daejoo Electronic and Daeduck Electronics 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 Daeduck Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and Daeduck Electronics.

Diversification Opportunities for Daejoo Electronic and Daeduck Electronics

-0.7

Correlation Coefficient

Daejoo Electronic  Daeduck Electronics

Excellent diversification

The 3 months correlation between Daejoo and Daeduck is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and Daeduck Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daeduck Electronics 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 Daeduck Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daeduck Electronics has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and Daeduck Electronics go up and down completely randomly.

Pair Corralation between Daejoo Electronic and Daeduck Electronics

Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to under-perform the Daeduck Electronics. In addition to that, Daejoo Electronic is 4.49 times more volatile than Daeduck Electronics Co. It trades about -0.05 of its total potential returns per unit of risk. Daeduck Electronics Co is currently generating about 0.08 per unit of volatility. If you would invest  620,000  in Daeduck Electronics Co on September 12, 2024 and sell it today you would earn a total of  25,000  from holding Daeduck Electronics Co or generate 4.03% return on investment over 90 days.

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

Daejoo Electronic Materials  vs.  Daeduck Electronics Co

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 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.

Daeduck Electronics

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daeduck Electronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daeduck Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daejoo Electronic and Daeduck Electronics

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

The idea behind Daejoo Electronic Materials and Daeduck Electronics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.