Correlation Between Daejung Chemicals and I Components

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

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

Diversification Opportunities for Daejung Chemicals and I Components

0.25

Correlation Coefficient

Daejung Chemicals  I Components

Modest diversification

The 3 months correlation between Daejung and 059100 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and i Components Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on i Components and Daejung Chemicals 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 Daejung Chemicals Metals are associated (or correlated) with I Components. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of i Components has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and I Components go up and down completely randomly.

Pair Corralation between Daejung Chemicals and I Components

Assuming the 90 days trading horizon Daejung Chemicals is expected to generate 3.49 times less return on investment than I Components. But when comparing it to its historical volatility, Daejung Chemicals Metals is 2.57 times less risky than I Components. It trades about 0.15 of its potential returns per unit of risk. i Components Co is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  471,000  in i Components Co on October 24, 2024 and sell it today you would earn a total of  44,000  from holding i Components Co or generate 9.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Daejung Chemicals Metals  vs.  i Components Co

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 somewhat strong basic indicators, Daejung Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

i Components

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in i Components Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, I Components sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daejung Chemicals and I Components

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

The idea behind Daejung Chemicals Metals and i Components 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.