Correlation Between Dongwoon Anatech and SIMMTECH

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

By analyzing existing cross correlation between Dongwoon Anatech Co and SIMMTECH Co, you can compare the effects of market volatilities on Dongwoon Anatech and SIMMTECH 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 Dongwoon Anatech with a short position of SIMMTECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoon Anatech and SIMMTECH.

Diversification Opportunities for Dongwoon Anatech and SIMMTECH

0.82

Correlation Coefficient

Dongwoon Anatech  SIMMTECH

Very poor diversification

The 3 months correlation between Dongwoon and SIMMTECH is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoon Anatech Co and SIMMTECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMMTECH and Dongwoon Anatech 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 Dongwoon Anatech Co are associated (or correlated) with SIMMTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMMTECH has no effect on the direction of Dongwoon Anatech i.e., Dongwoon Anatech and SIMMTECH go up and down completely randomly.

Pair Corralation between Dongwoon Anatech and SIMMTECH

Assuming the 90 days trading horizon Dongwoon Anatech is expected to generate 3.86 times less return on investment than SIMMTECH. But when comparing it to its historical volatility, Dongwoon Anatech Co is 2.01 times less risky than SIMMTECH. It trades about 0.12 of its potential returns per unit of risk. SIMMTECH Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,112,000  in SIMMTECH Co on December 27, 2024 and sell it today you would earn a total of  1,063,000  from holding SIMMTECH Co or generate 95.59% return on investment over 90 days.

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

Dongwoon Anatech Co  vs.  SIMMTECH Co

Dongwoon Anatech

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwoon Anatech Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwoon Anatech sustained solid returns over the last few months and may actually be approaching a breakup point.

SIMMTECH

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SIMMTECH Co are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SIMMTECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongwoon Anatech and SIMMTECH

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

The idea behind Dongwoon Anatech Co and SIMMTECH 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.