Correlation Between Dongwoo Farm and Asia Seed

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

Diversification Opportunities for Dongwoo Farm and Asia Seed

0.63

Correlation Coefficient

Dongwoo Farm  Asia Seed

Poor diversification

The 3 months correlation between Dongwoo and Asia is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and Asia Seed CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Seed CoLtd 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 Asia Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Seed CoLtd has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and Asia Seed go up and down completely randomly.

Pair Corralation between Dongwoo Farm and Asia Seed

Assuming the 90 days trading horizon Dongwoo Farm To is expected to generate 0.67 times more return on investment than Asia Seed. However, Dongwoo Farm To is 1.49 times less risky than Asia Seed. It trades about -0.06 of its potential returns per unit of risk. Asia Seed CoLtd is currently generating about -0.23 per unit of risk. If you would invest  201,000  in Dongwoo Farm To on September 12, 2024 and sell it today you would lose (10,000) from holding Dongwoo Farm To or give up 4.98% of portfolio value over 90 days.

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

Dongwoo Farm To  vs.  Asia Seed CoLtd

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.

Asia Seed CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asia Seed CoLtd 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 Asia Seed

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

The idea behind Dongwoo Farm To and Asia Seed CoLtd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.