Correlation Between Daechang Steel and Clean Science

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

Diversification Opportunities for Daechang Steel and Clean Science

0.66

Correlation Coefficient

Daechang Steel  Clean Science

Poor diversification

The 3 months correlation between Daechang and Clean is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Daechang Steel Co and Clean Science co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Science co 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 Clean Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Science co has no effect on the direction of Daechang Steel i.e., Daechang Steel and Clean Science go up and down completely randomly.

Pair Corralation between Daechang Steel and Clean Science

Assuming the 90 days trading horizon Daechang Steel Co is expected to generate 0.88 times more return on investment than Clean Science. However, Daechang Steel Co is 1.14 times less risky than Clean Science. It trades about 0.02 of its potential returns per unit of risk. Clean Science co is currently generating about 0.02 per unit of risk. If you would invest  209,155  in Daechang Steel Co on October 23, 2024 and sell it today you would earn a total of  3,345  from holding Daechang Steel Co or generate 1.6% return on investment over 90 days.

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

Daechang Steel Co  vs.  Clean Science co

Daechang Steel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daechang Steel Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Clean Science co

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Daechang Steel Co and Clean Science 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..