Correlation Between NewFlex Technology and Daelim Industrial

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

By analyzing existing cross correlation between NewFlex Technology Co and Daelim Industrial Co, you can compare the effects of market volatilities on NewFlex Technology and Daelim Industrial 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 NewFlex Technology with a short position of Daelim Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewFlex Technology and Daelim Industrial.

Diversification Opportunities for NewFlex Technology and Daelim Industrial

0.01

Correlation Coefficient

NewFlex Technology  Daelim Industrial

Significant diversification

The 3 months correlation between NewFlex and Daelim is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NewFlex Technology Co and Daelim Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daelim Industrial and NewFlex Technology 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 NewFlex Technology Co are associated (or correlated) with Daelim Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daelim Industrial has no effect on the direction of NewFlex Technology i.e., NewFlex Technology and Daelim Industrial go up and down completely randomly.

Pair Corralation between NewFlex Technology and Daelim Industrial

Assuming the 90 days trading horizon NewFlex Technology Co is expected to generate 2.41 times more return on investment than Daelim Industrial. However, NewFlex Technology is 2.41 times more volatile than Daelim Industrial Co. It trades about 0.06 of its potential returns per unit of risk. Daelim Industrial Co is currently generating about -0.03 per unit of risk. If you would invest  449,000  in NewFlex Technology Co on December 1, 2024 and sell it today you would earn a total of  48,000  from holding NewFlex Technology Co or generate 10.69% return on investment over 90 days.

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

NewFlex Technology Co  vs.  Daelim Industrial Co

NewFlex Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NewFlex Technology Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NewFlex Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Daelim Industrial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with NewFlex Technology and Daelim Industrial

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

The idea behind NewFlex Technology Co and Daelim Industrial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.