Correlation Between Daejung Chemicals and Dong A

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

Diversification Opportunities for Daejung Chemicals and Dong A

0.52

Correlation Coefficient

Daejung Chemicals  Dong A

Very weak diversification

The 3 months correlation between Daejung and Dong is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek 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 Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Dong A go up and down completely randomly.

Pair Corralation between Daejung Chemicals and Dong A

Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, Daejung Chemicals Metals is 2.67 times less risky than Dong A. The stock trades about -0.07 of its potential returns per unit of risk. The Dong A Eltek is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  415,359  in Dong A Eltek on October 9, 2024 and sell it today you would lose (50,359) from holding Dong A Eltek or give up 12.12% of portfolio value over 90 days.

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

Daejung Chemicals Metals  vs.  Dong A Eltek

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.

Dong A Eltek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong A Eltek has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daejung Chemicals and Dong A

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

The idea behind Daejung Chemicals Metals and Dong A Eltek 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.