Correlation Between Next Entertainment and Daesung Hi

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

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

Diversification Opportunities for Next Entertainment and Daesung Hi

0.77

Correlation Coefficient

Next Entertainment  Daesung Hi

Poor diversification

The 3 months correlation between Next and Daesung is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Next Entertainment World and Daesung Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daesung Hi Tech and Next Entertainment 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 Next Entertainment World are associated (or correlated) with Daesung Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daesung Hi Tech has no effect on the direction of Next Entertainment i.e., Next Entertainment and Daesung Hi go up and down completely randomly.

Pair Corralation between Next Entertainment and Daesung Hi

Assuming the 90 days trading horizon Next Entertainment World is expected to under-perform the Daesung Hi. But the stock apears to be less risky and, when comparing its historical volatility, Next Entertainment World is 1.2 times less risky than Daesung Hi. The stock trades about -0.07 of its potential returns per unit of risk. The Daesung Hi Tech Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  903,000  in Daesung Hi Tech Co on October 11, 2024 and sell it today you would lose (565,500) from holding Daesung Hi Tech Co or give up 62.62% of portfolio value over 90 days.

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

Next Entertainment World  vs.  Daesung Hi Tech Co

Next Entertainment World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Next Entertainment World has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Next Entertainment and Daesung Hi

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

The idea behind Next Entertainment World and Daesung Hi Tech 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.