Correlation Between Daechang Steel and Genie Music

Can any of the company-specific risk be diversified away by investing in both Daechang Steel and Genie Music 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 Daechang Steel and Genie Music into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Daechang Steel and Genie Music

0.62

Correlation Coefficient

Daechang Steel  Genie Music

Poor diversification

The 3 months correlation between Daechang and Genie is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Daechang Steel Co and Genie Music in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genie Music and Daechang Steel 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 Daechang Steel Co are associated (or correlated) with Genie Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genie Music has no effect on the direction of Daechang Steel i.e., Daechang Steel and Genie Music go up and down completely randomly.

Pair Corralation between Daechang Steel and Genie Music

Assuming the 90 days trading horizon Daechang Steel Co is expected to under-perform the Genie Music. But the stock apears to be less risky and, when comparing its historical volatility, Daechang Steel Co is 2.21 times less risky than Genie Music. The stock trades about -0.09 of its potential returns per unit of risk. The Genie Music is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  215,000  in Genie Music on September 22, 2024 and sell it today you would lose (1,500) from holding Genie Music or give up 0.7% of portfolio value over 90 days.

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

Daechang Steel Co  vs.  Genie Music

Daechang Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daechang Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daechang Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Genie Music

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Music has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Genie Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daechang Steel and Genie Music

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

The idea behind Daechang Steel Co and Genie Music 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.