Correlation Between Daesung Industrial and Mobile Appliance

Can any of the company-specific risk be diversified away by investing in both Daesung Industrial and Mobile Appliance 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 Daesung Industrial and Mobile Appliance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daesung Industrial Co and Mobile Appliance, you can compare the effects of market volatilities on Daesung Industrial and Mobile Appliance 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 Daesung Industrial with a short position of Mobile Appliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daesung Industrial and Mobile Appliance.

Diversification Opportunities for Daesung Industrial and Mobile Appliance

0.73

Correlation Coefficient

Daesung Industrial  Mobile Appliance

Poor diversification

The 3 months correlation between Daesung and Mobile is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Industrial Co and Mobile Appliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mobile Appliance and Daesung Industrial 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 Daesung Industrial Co are associated (or correlated) with Mobile Appliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mobile Appliance has no effect on the direction of Daesung Industrial i.e., Daesung Industrial and Mobile Appliance go up and down completely randomly.

Pair Corralation between Daesung Industrial and Mobile Appliance

Assuming the 90 days trading horizon Daesung Industrial is expected to generate 6.05 times less return on investment than Mobile Appliance. In addition to that, Daesung Industrial is 1.1 times more volatile than Mobile Appliance. It trades about 0.05 of its total potential returns per unit of risk. Mobile Appliance is currently generating about 0.36 per unit of volatility. If you would invest  189,400  in Mobile Appliance on October 11, 2024 and sell it today you would earn a total of  30,100  from holding Mobile Appliance or generate 15.89% return on investment over 90 days.

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

Daesung Industrial Co  vs.  Mobile Appliance

Daesung Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daesung Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daesung Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mobile Appliance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mobile Appliance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mobile Appliance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daesung Industrial and Mobile Appliance

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

The idea behind Daesung Industrial Co and Mobile Appliance 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.