Correlation Between Dongwoo Farm and Dongsin Engineering

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

By analyzing existing cross correlation between Dongwoo Farm To and Dongsin Engineering Construction, you can compare the effects of market volatilities on Dongwoo Farm and Dongsin Engineering 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 Dongwoo Farm with a short position of Dongsin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and Dongsin Engineering.

Diversification Opportunities for Dongwoo Farm and Dongsin Engineering

0.28

Correlation Coefficient

Dongwoo Farm  Dongsin Engineering

Modest diversification

The 3 months correlation between Dongwoo and Dongsin is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Dongsin Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongsin Engineering and Dongwoo Farm 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 Dongwoo Farm To are associated (or correlated) with Dongsin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongsin Engineering has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Dongsin Engineering go up and down completely randomly.

Pair Corralation between Dongwoo Farm and Dongsin Engineering

Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 0.13 times more return on investment than Dongsin Engineering. However, Dongwoo Farm To is 7.72 times less risky than Dongsin Engineering. It trades about 0.05 of its potential returns per unit of risk. Dongsin Engineering Construction is currently generating about 0.0 per unit of risk. If you would invest  190,800  in Dongwoo Farm To on December 26, 2024 and sell it today you would earn a total of  4,600  from holding Dongwoo Farm To or generate 2.41% return on investment over 90 days.

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

Dongwoo Farm To  vs.  Dongsin Engineering Constructi

Dongwoo Farm To

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwoo Farm To are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongwoo Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dongsin Engineering

Risk-Adjusted Performance

Weak

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

Pair Trading with Dongwoo Farm and Dongsin Engineering

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

The idea behind Dongwoo Farm To and Dongsin Engineering Construction 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.