Correlation Between Fine Besteel and Daesung Eltec

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

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

Diversification Opportunities for Fine Besteel and Daesung Eltec

-0.43

Correlation Coefficient

Fine Besteel  Daesung Eltec

Very good diversification

The 3 months correlation between Fine and Daesung is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel Co and Daesung Eltec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Eltec and Fine Besteel 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 Fine Besteel Co are associated (or correlated) with Daesung Eltec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Eltec has no effect on the direction of Fine Besteel i.e., Fine Besteel and Daesung Eltec go up and down completely randomly.

Pair Corralation between Fine Besteel and Daesung Eltec

Assuming the 90 days trading horizon Fine Besteel Co is expected to generate 0.62 times more return on investment than Daesung Eltec. However, Fine Besteel Co is 1.61 times less risky than Daesung Eltec. It trades about 0.11 of its potential returns per unit of risk. Daesung Eltec Co is currently generating about 0.03 per unit of risk. If you would invest  85,900  in Fine Besteel Co on October 23, 2024 and sell it today you would earn a total of  19,500  from holding Fine Besteel Co or generate 22.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.69%
Values	Daily Returns

Fine Besteel Co  vs.  Daesung Eltec Co

Fine Besteel

Risk-Adjusted Performance

8 of 100

OK

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

Daesung Eltec

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daesung Eltec Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daesung Eltec may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fine Besteel and Daesung Eltec

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

The idea behind Fine Besteel Co and Daesung Eltec 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.