Correlation Between Dongbang Ship and GS Engineering

Can any of the company-specific risk be diversified away by investing in both Dongbang Ship and GS Engineering 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 GS Engineering 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 GS Engineering Construction, you can compare the effects of market volatilities on Dongbang Ship and GS Engineering 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 GS Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Ship and GS Engineering.

Diversification Opportunities for Dongbang Ship and GS Engineering

-0.46

Correlation Coefficient

Dongbang Ship  GS Engineering

Very good diversification

The 3 months correlation between Dongbang and 006360 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery and GS Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Engineering Const 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 GS Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Engineering Const has no effect on the direction of Dongbang Ship i.e., Dongbang Ship and GS Engineering go up and down completely randomly.

Pair Corralation between Dongbang Ship and GS Engineering

Assuming the 90 days trading horizon Dongbang Ship Machinery is expected to generate 1.35 times more return on investment than GS Engineering. However, Dongbang Ship is 1.35 times more volatile than GS Engineering Construction. It trades about 0.06 of its potential returns per unit of risk. GS Engineering Construction is currently generating about -0.03 per unit of risk. If you would invest  304,000  in Dongbang Ship Machinery on October 23, 2024 and sell it today you would earn a total of  26,000  from holding Dongbang Ship Machinery or generate 8.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Dongbang Ship Machinery  vs.  GS Engineering Construction

Dongbang Ship Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 4 (%) 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.

GS Engineering Const

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GS Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GS Engineering is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongbang Ship and GS Engineering

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

The idea behind Dongbang Ship Machinery and GS Engineering Construction 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..