Correlation Between Grand Korea and Daejung Chemicals

Can any of the company-specific risk be diversified away by investing in both Grand Korea and Daejung Chemicals 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 Grand Korea and Daejung Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grand Korea Leisure and Daejung Chemicals Metals, you can compare the effects of market volatilities on Grand Korea and Daejung Chemicals 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 Grand Korea with a short position of Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Korea and Daejung Chemicals.

Diversification Opportunities for Grand Korea and Daejung Chemicals

0.51

Correlation Coefficient

Grand Korea  Daejung Chemicals

Very weak diversification

The 3 months correlation between Grand and Daejung is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Grand Korea Leisure and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals and Grand Korea 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 Grand Korea Leisure are associated (or correlated) with Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of Grand Korea i.e., Grand Korea and Daejung Chemicals go up and down completely randomly.

Pair Corralation between Grand Korea and Daejung Chemicals

Assuming the 90 days trading horizon Grand Korea Leisure is expected to under-perform the Daejung Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Grand Korea Leisure is 1.2 times less risky than Daejung Chemicals. The stock trades about -0.01 of its potential returns per unit of risk. The Daejung Chemicals Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,278,000  in Daejung Chemicals Metals on September 25, 2024 and sell it today you would earn a total of  42,000  from holding Daejung Chemicals Metals or generate 3.29% return on investment over 90 days.

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

Grand Korea Leisure  vs.  Daejung Chemicals Metals

Grand Korea Leisure

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daejung Chemicals Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejung Chemicals Metals 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.

Pair Trading with Grand Korea and Daejung Chemicals

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

The idea behind Grand Korea Leisure and Daejung Chemicals Metals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.