Correlation Between Daejung Chemicals and PNC Technologies

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

Diversification Opportunities for Daejung Chemicals and PNC Technologies

0.74

Correlation Coefficient

Daejung Chemicals  PNC Technologies

Poor diversification

The 3 months correlation between Daejung and PNC is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and PNC Technologies co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Technologies 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 PNC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Technologies has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and PNC Technologies go up and down completely randomly.

Pair Corralation between Daejung Chemicals and PNC Technologies

Assuming the 90 days trading horizon Daejung Chemicals is expected to generate 1.2 times less return on investment than PNC Technologies. But when comparing it to its historical volatility, Daejung Chemicals Metals is 1.43 times less risky than PNC Technologies. It trades about 0.04 of its potential returns per unit of risk. PNC Technologies co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  383,675  in PNC Technologies co on December 4, 2024 and sell it today you would earn a total of  13,825  from holding PNC Technologies co or generate 3.6% return on investment over 90 days.

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

Daejung Chemicals Metals  vs.  PNC Technologies co

Daejung Chemicals Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daejung Chemicals Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

PNC Technologies

Risk-Adjusted Performance

Weak

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

Pair Trading with Daejung Chemicals and PNC Technologies

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

The idea behind Daejung Chemicals Metals and PNC Technologies 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.