Correlation Between ABOV Semiconductor and Daewoo Electronic

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

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

Diversification Opportunities for ABOV Semiconductor and Daewoo Electronic

0.56

Correlation Coefficient

ABOV Semiconductor  Daewoo Electronic

Very weak diversification

The 3 months correlation between ABOV and Daewoo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ABOV Semiconductor Co and Daewoo Electronic Components in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Electronic and ABOV Semiconductor 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 ABOV Semiconductor Co are associated (or correlated) with Daewoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Electronic has no effect on the direction of ABOV Semiconductor i.e., ABOV Semiconductor and Daewoo Electronic go up and down completely randomly.

Pair Corralation between ABOV Semiconductor and Daewoo Electronic

Assuming the 90 days trading horizon ABOV Semiconductor Co is expected to generate 7.55 times more return on investment than Daewoo Electronic. However, ABOV Semiconductor is 7.55 times more volatile than Daewoo Electronic Components. It trades about 0.18 of its potential returns per unit of risk. Daewoo Electronic Components is currently generating about 0.01 per unit of risk. If you would invest  775,551  in ABOV Semiconductor Co on December 23, 2024 and sell it today you would earn a total of  502,449  from holding ABOV Semiconductor Co or generate 64.79% return on investment over 90 days.

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

ABOV Semiconductor Co  vs.  Daewoo Electronic Components

ABOV Semiconductor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABOV Semiconductor Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABOV Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Daewoo Electronic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ABOV Semiconductor and Daewoo Electronic

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

The idea behind ABOV Semiconductor Co and Daewoo Electronic Components 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.