Correlation Between Dongbang Ship and Seoulin Bioscience

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

Diversification Opportunities for Dongbang Ship and Seoulin Bioscience

-0.29

Correlation Coefficient

Dongbang Ship  Seoulin Bioscience

Very good diversification

The 3 months correlation between Dongbang and Seoulin is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery and Seoulin Bioscience CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoulin Bioscience CoLtd 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 Seoulin Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoulin Bioscience CoLtd has no effect on the direction of Dongbang Ship i.e., Dongbang Ship and Seoulin Bioscience go up and down completely randomly.

Pair Corralation between Dongbang Ship and Seoulin Bioscience

Assuming the 90 days trading horizon Dongbang Ship Machinery is expected to generate 1.88 times more return on investment than Seoulin Bioscience. However, Dongbang Ship is 1.88 times more volatile than Seoulin Bioscience CoLtd. It trades about 0.04 of its potential returns per unit of risk. Seoulin Bioscience CoLtd is currently generating about -0.05 per unit of risk. If you would invest  315,000  in Dongbang Ship Machinery on December 25, 2024 and sell it today you would earn a total of  12,000  from holding Dongbang Ship Machinery or generate 3.81% return on investment over 90 days.

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

Dongbang Ship Machinery  vs.  Seoulin Bioscience CoLtd

Dongbang Ship Machinery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Ship Machinery are ranked lower than 2 (%) 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 April 2025.

Seoulin Bioscience CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seoulin Bioscience CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Seoulin Bioscience 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 Seoulin Bioscience

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

The idea behind Dongbang Ship Machinery and Seoulin Bioscience 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.