Correlation Between Daesung Hi and Miwon Chemicals

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

Diversification Opportunities for Daesung Hi and Miwon Chemicals

0.29

Correlation Coefficient

Daesung Hi  Miwon Chemicals

Modest diversification

The 3 months correlation between Daesung and Miwon is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Hi Tech Co and Miwon Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemicals 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 Miwon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemicals has no effect on the direction of Daesung Hi i.e., Daesung Hi and Miwon Chemicals go up and down completely randomly.

Pair Corralation between Daesung Hi and Miwon Chemicals

Assuming the 90 days trading horizon Daesung Hi Tech Co is expected to under-perform the Miwon Chemicals. In addition to that, Daesung Hi is 2.77 times more volatile than Miwon Chemicals Co. It trades about -0.07 of its total potential returns per unit of risk. Miwon Chemicals Co is currently generating about 0.13 per unit of volatility. If you would invest  7,640,255  in Miwon Chemicals Co on October 5, 2024 and sell it today you would earn a total of  219,745  from holding Miwon Chemicals Co or generate 2.88% return on investment over 90 days.

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

Daesung Hi Tech Co  vs.  Miwon Chemicals Co

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.

Miwon Chemicals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Miwon Chemicals Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Miwon Chemicals 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 Miwon Chemicals

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

The idea behind Daesung Hi Tech Co and Miwon Chemicals 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.