Correlation Between Alton Sports and Daekyung Machinery

Can any of the company-specific risk be diversified away by investing in both Alton Sports and Daekyung Machinery 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 Alton Sports and Daekyung Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alton Sports CoLtd and Daekyung Machinery Engineering, you can compare the effects of market volatilities on Alton Sports and Daekyung Machinery 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 Alton Sports with a short position of Daekyung Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alton Sports and Daekyung Machinery.

Diversification Opportunities for Alton Sports and Daekyung Machinery

-0.47

Correlation Coefficient

Alton Sports  Daekyung Machinery

Very good diversification

The 3 months correlation between Alton and Daekyung is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alton Sports CoLtd and Daekyung Machinery Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daekyung Machinery and Alton Sports 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 Alton Sports CoLtd are associated (or correlated) with Daekyung Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daekyung Machinery has no effect on the direction of Alton Sports i.e., Alton Sports and Daekyung Machinery go up and down completely randomly.

Pair Corralation between Alton Sports and Daekyung Machinery

Assuming the 90 days trading horizon Alton Sports CoLtd is expected to under-perform the Daekyung Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Alton Sports CoLtd is 2.2 times less risky than Daekyung Machinery. The stock trades about -0.23 of its potential returns per unit of risk. The Daekyung Machinery Engineering is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  41,300  in Daekyung Machinery Engineering on September 12, 2024 and sell it today you would earn a total of  10,200  from holding Daekyung Machinery Engineering or generate 24.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	84.48%
Values	Daily Returns

Alton Sports CoLtd  vs.  Daekyung Machinery Engineering

Alton Sports CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alton Sports CoLtd 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daekyung Machinery

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Daekyung Machinery Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Daekyung Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alton Sports and Daekyung Machinery

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

The idea behind Alton Sports CoLtd and Daekyung Machinery Engineering 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..