Correlation Between Daesung Hi-Tech and Jin Air

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

Diversification Opportunities for Daesung Hi-Tech and Jin Air

-0.28

Correlation Coefficient

Daesung Hi-Tech  Jin Air

Very good diversification

The 3 months correlation between Daesung and Jin is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Daesung Hi Tech Co and Jin Air Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jin Air and Daesung Hi-Tech 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 Jin Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jin Air has no effect on the direction of Daesung Hi-Tech i.e., Daesung Hi-Tech and Jin Air go up and down completely randomly.

Pair Corralation between Daesung Hi-Tech and Jin Air

Assuming the 90 days trading horizon Daesung Hi Tech Co is expected to under-perform the Jin Air. In addition to that, Daesung Hi-Tech is 1.63 times more volatile than Jin Air Co. It trades about -0.03 of its total potential returns per unit of risk. Jin Air Co is currently generating about -0.03 per unit of volatility. If you would invest  1,600,000  in Jin Air Co on September 20, 2024 and sell it today you would lose (571,000) from holding Jin Air Co or give up 35.69% of portfolio value over 90 days.

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

Daesung Hi Tech Co  vs.  Jin Air 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jin Air

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Daesung Hi Tech Co and Jin Air 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.