Correlation Between Mobile Appliance and Dong A

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

By analyzing existing cross correlation between Mobile Appliance and Dong A Eltek, you can compare the effects of market volatilities on Mobile Appliance and Dong A 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 Mobile Appliance with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mobile Appliance and Dong A.

Diversification Opportunities for Mobile Appliance and Dong A

0.6

Correlation Coefficient

Mobile Appliance  Dong A

Poor diversification

The 3 months correlation between Mobile and Dong is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mobile Appliance and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek and Mobile Appliance 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 Mobile Appliance are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Mobile Appliance i.e., Mobile Appliance and Dong A go up and down completely randomly.

Pair Corralation between Mobile Appliance and Dong A

Assuming the 90 days trading horizon Mobile Appliance is expected to generate 1.12 times more return on investment than Dong A. However, Mobile Appliance is 1.12 times more volatile than Dong A Eltek. It trades about -0.06 of its potential returns per unit of risk. Dong A Eltek is currently generating about -0.11 per unit of risk. If you would invest  246,000  in Mobile Appliance on October 8, 2024 and sell it today you would lose (35,000) from holding Mobile Appliance or give up 14.23% of portfolio value over 90 days.

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

Mobile Appliance  vs.  Dong A Eltek

Mobile Appliance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mobile Appliance 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dong A Eltek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong A Eltek 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mobile Appliance and Dong A

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

The idea behind Mobile Appliance and Dong A Eltek 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.