Correlation Between Dongbang Ship and Pharmicell

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

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

Diversification Opportunities for Dongbang Ship and Pharmicell

0.58

Correlation Coefficient

Dongbang Ship  Pharmicell

Very weak diversification

The 3 months correlation between Dongbang and Pharmicell is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery and Pharmicell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmicell and Dongbang Ship 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 Dongbang Ship Machinery are associated (or correlated) with Pharmicell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmicell has no effect on the direction of Dongbang Ship i.e., Dongbang Ship and Pharmicell go up and down completely randomly.

Pair Corralation between Dongbang Ship and Pharmicell

Assuming the 90 days trading horizon Dongbang Ship is expected to generate 4.1 times less return on investment than Pharmicell. But when comparing it to its historical volatility, Dongbang Ship Machinery is 1.47 times less risky than Pharmicell. It trades about 0.07 of its potential returns per unit of risk. Pharmicell is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  800,000  in Pharmicell on October 26, 2024 and sell it today you would earn a total of  108,000  from holding Pharmicell or generate 13.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Dongbang Ship Machinery  vs.  Pharmicell

Dongbang Ship Machinery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongbang Ship may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pharmicell

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pharmicell are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pharmicell sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongbang Ship and Pharmicell

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

The idea behind Dongbang Ship Machinery and Pharmicell 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.