Correlation Between High Tech and Daihan Pharmaceutical

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

By analyzing existing cross correlation between High Tech Pharm and Daihan Pharmaceutical CoLtd, you can compare the effects of market volatilities on High Tech and Daihan Pharmaceutical 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 High Tech with a short position of Daihan Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Tech and Daihan Pharmaceutical.

Diversification Opportunities for High Tech and Daihan Pharmaceutical

-0.07

Correlation Coefficient

High Tech  Daihan Pharmaceutical

Good diversification

The 3 months correlation between High and Daihan is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding High Tech Pharm and Daihan Pharmaceutical CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daihan Pharmaceutical and High Tech 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 High Tech Pharm are associated (or correlated) with Daihan Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daihan Pharmaceutical has no effect on the direction of High Tech i.e., High Tech and Daihan Pharmaceutical go up and down completely randomly.

Pair Corralation between High Tech and Daihan Pharmaceutical

Assuming the 90 days trading horizon High Tech Pharm is expected to under-perform the Daihan Pharmaceutical. In addition to that, High Tech is 2.77 times more volatile than Daihan Pharmaceutical CoLtd. It trades about -0.04 of its total potential returns per unit of risk. Daihan Pharmaceutical CoLtd is currently generating about 0.03 per unit of volatility. If you would invest  2,540,851  in Daihan Pharmaceutical CoLtd on November 20, 2024 and sell it today you would earn a total of  39,149  from holding Daihan Pharmaceutical CoLtd or generate 1.54% return on investment over 90 days.

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

High Tech Pharm  vs.  Daihan Pharmaceutical CoLtd

High Tech Pharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days High Tech Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Daihan Pharmaceutical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daihan Pharmaceutical CoLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daihan Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High Tech and Daihan Pharmaceutical

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

The idea behind High Tech Pharm and Daihan Pharmaceutical 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.