Correlation Between Dongwoo Farm and EBEST Investment

Can any of the company-specific risk be diversified away by investing in both Dongwoo Farm and EBEST Investment 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 EBEST Investment 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 EBEST Investment Securities, you can compare the effects of market volatilities on Dongwoo Farm and EBEST Investment 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 EBEST Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and EBEST Investment.

Diversification Opportunities for Dongwoo Farm and EBEST Investment

0.81

Correlation Coefficient

Dongwoo Farm  EBEST Investment

Very poor diversification

The 3 months correlation between Dongwoo and EBEST is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and EBEST Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBEST Investment Sec 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 EBEST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBEST Investment Sec has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and EBEST Investment go up and down completely randomly.

Pair Corralation between Dongwoo Farm and EBEST Investment

Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 0.74 times more return on investment than EBEST Investment. However, Dongwoo Farm To is 1.35 times less risky than EBEST Investment. It trades about 0.07 of its potential returns per unit of risk. EBEST Investment Securities is currently generating about -0.12 per unit of risk. If you would invest  189,028  in Dongwoo Farm To on September 29, 2024 and sell it today you would earn a total of  3,972  from holding Dongwoo Farm To or generate 2.1% return on investment over 90 days.

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

Dongwoo Farm To  vs.  EBEST Investment Securities

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongwoo Farm To has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

EBEST Investment Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EBEST Investment Securities 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dongwoo Farm and EBEST Investment

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

The idea behind Dongwoo Farm To and EBEST Investment Securities 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.