Correlation Between Daesung Hi and Korea Computer

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

Diversification Opportunities for Daesung Hi and Korea Computer

-0.03

Correlation Coefficient

Daesung Hi  Korea Computer

Good diversification

The 3 months correlation between Daesung and Korea is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Hi Tech Co and Korea Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer 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 Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer has no effect on the direction of Daesung Hi i.e., Daesung Hi and Korea Computer go up and down completely randomly.

Pair Corralation between Daesung Hi and Korea Computer

Assuming the 90 days trading horizon Daesung Hi Tech Co is expected to under-perform the Korea Computer. But the stock apears to be less risky and, when comparing its historical volatility, Daesung Hi Tech Co is 1.01 times less risky than Korea Computer. The stock trades about -0.07 of its potential returns per unit of risk. The Korea Computer is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  477,837  in Korea Computer on October 5, 2024 and sell it today you would earn a total of  46,163  from holding Korea Computer or generate 9.66% 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.  Korea Computer

Daesung Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daesung Hi Tech Co 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Korea Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Computer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Computer 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 Hi and Korea Computer

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

The idea behind Daesung Hi Tech Co and Korea Computer 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.