Correlation Between Dongwoo Farm and JC Chemical

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

Diversification Opportunities for Dongwoo Farm and JC Chemical

0.79

Correlation Coefficient

Dongwoo Farm  JC Chemical

Poor diversification

The 3 months correlation between Dongwoo and 137950 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and JC Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JC Chemical 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 JC Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JC Chemical has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and JC Chemical go up and down completely randomly.

Pair Corralation between Dongwoo Farm and JC Chemical

Assuming the 90 days trading horizon Dongwoo Farm is expected to generate 3.6 times less return on investment than JC Chemical. But when comparing it to its historical volatility, Dongwoo Farm To is 2.15 times less risky than JC Chemical. It trades about 0.04 of its potential returns per unit of risk. JC Chemical Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  375,000  in JC Chemical Co on October 3, 2024 and sell it today you would earn a total of  12,000  from holding JC Chemical Co or generate 3.2% return on investment over 90 days.

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

Dongwoo Farm To  vs.  JC Chemical Co

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.

JC Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JC Chemical Co 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 Dongwoo Farm and JC Chemical

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

The idea behind Dongwoo Farm To and JC Chemical 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.