Correlation Between Daesung Hi and Guyoung Technology

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

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

Diversification Opportunities for Daesung Hi and Guyoung Technology

-0.14

Correlation Coefficient

Daesung Hi  Guyoung Technology

Good diversification

The 3 months correlation between Daesung and Guyoung is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Hi Tech Co and Guyoung Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guyoung Technology and Daesung Hi 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 Hi Tech Co are associated (or correlated) with Guyoung Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guyoung Technology has no effect on the direction of Daesung Hi i.e., Daesung Hi and Guyoung Technology go up and down completely randomly.

Pair Corralation between Daesung Hi and Guyoung Technology

Assuming the 90 days trading horizon Daesung Hi Tech Co is expected to generate 2.43 times more return on investment than Guyoung Technology. However, Daesung Hi is 2.43 times more volatile than Guyoung Technology Co. It trades about 0.09 of its potential returns per unit of risk. Guyoung Technology Co is currently generating about 0.11 per unit of risk. If you would invest  326,500  in Daesung Hi Tech Co on December 26, 2024 and sell it today you would earn a total of  73,000  from holding Daesung Hi Tech Co or generate 22.36% return on investment over 90 days.

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

Daesung Hi Tech Co  vs.  Guyoung Technology Co

Daesung Hi Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daesung Hi Tech Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daesung Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Guyoung Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guyoung Technology Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guyoung Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daesung Hi and Guyoung Technology

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

The idea behind Daesung Hi Tech Co and Guyoung Technology 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.