Correlation Between Dong A and Dreamus

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

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

Diversification Opportunities for Dong A and Dreamus

0.36

Correlation Coefficient

Dong A  Dreamus

Weak diversification

The 3 months correlation between Dong and Dreamus is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Eltek and Dreamus Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreamus Company and Dong A 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 Dong A Eltek are associated (or correlated) with Dreamus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreamus Company has no effect on the direction of Dong A i.e., Dong A and Dreamus go up and down completely randomly.

Pair Corralation between Dong A and Dreamus

Assuming the 90 days trading horizon Dong A Eltek is expected to generate 1.01 times more return on investment than Dreamus. However, Dong A is 1.01 times more volatile than Dreamus Company. It trades about 0.03 of its potential returns per unit of risk. Dreamus Company is currently generating about -0.01 per unit of risk. If you would invest  308,964  in Dong A Eltek on September 20, 2024 and sell it today you would earn a total of  95,036  from holding Dong A Eltek or generate 30.76% return on investment over 90 days.

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

Dong A Eltek  vs.  Dreamus Company

Dong A Eltek

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Eltek are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dong A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dreamus Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dong A and Dreamus

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

The idea behind Dong A Eltek and Dreamus Company 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.