Correlation Between Daejung Chemicals and Wireless Power

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

Diversification Opportunities for Daejung Chemicals and Wireless Power

0.79

Correlation Coefficient

Daejung Chemicals  Wireless Power

Poor diversification

The 3 months correlation between Daejung and Wireless is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Daejung Chemicals Metals and Wireless Power Amplifier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wireless Power Amplifier 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 Wireless Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wireless Power Amplifier has no effect on the direction of Daejung Chemicals i.e., Daejung Chemicals and Wireless Power go up and down completely randomly.

Pair Corralation between Daejung Chemicals and Wireless Power

Assuming the 90 days trading horizon Daejung Chemicals Metals is expected to under-perform the Wireless Power. But the stock apears to be less risky and, when comparing its historical volatility, Daejung Chemicals Metals is 1.81 times less risky than Wireless Power. The stock trades about -0.07 of its potential returns per unit of risk. The Wireless Power Amplifier is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  302,000  in Wireless Power Amplifier on October 9, 2024 and sell it today you would lose (17,000) from holding Wireless Power Amplifier or give up 5.63% of portfolio value over 90 days.

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

Daejung Chemicals Metals  vs.  Wireless Power Amplifier

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.

Wireless Power Amplifier

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wireless Power Amplifier are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wireless Power may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Daejung Chemicals and Wireless Power

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

The idea behind Daejung Chemicals Metals and Wireless Power Amplifier 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.