Correlation Between Dongbang Ship and Elentec

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

Diversification Opportunities for Dongbang Ship and Elentec

0.24

Correlation Coefficient

Dongbang Ship  Elentec

Modest diversification

The 3 months correlation between Dongbang and Elentec is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Ship Machinery and Elentec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elentec 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 Elentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elentec has no effect on the direction of Dongbang Ship i.e., Dongbang Ship and Elentec go up and down completely randomly.

Pair Corralation between Dongbang Ship and Elentec

Assuming the 90 days trading horizon Dongbang Ship is expected to generate 1.61 times less return on investment than Elentec. In addition to that, Dongbang Ship is 1.2 times more volatile than Elentec Co. It trades about 0.02 of its total potential returns per unit of risk. Elentec Co is currently generating about 0.04 per unit of volatility. If you would invest  486,000  in Elentec Co on December 26, 2024 and sell it today you would earn a total of  18,000  from holding Elentec Co or generate 3.7% return on investment over 90 days.

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

Dongbang Ship Machinery  vs.  Elentec Co

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 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongbang Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Elentec

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elentec Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Elentec 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 Elentec

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

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