Correlation Between DRB Industrial and Cheryong Industrial

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

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

Diversification Opportunities for DRB Industrial and Cheryong Industrial

0.42

Correlation Coefficient

DRB Industrial  Cheryong Industrial

Very weak diversification

The 3 months correlation between DRB and Cheryong is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding DRB Industrial Co and Cheryong Industrial CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheryong Industrial CoLtd and DRB Industrial 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 DRB Industrial Co are associated (or correlated) with Cheryong Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheryong Industrial CoLtd has no effect on the direction of DRB Industrial i.e., DRB Industrial and Cheryong Industrial go up and down completely randomly.

Pair Corralation between DRB Industrial and Cheryong Industrial

Assuming the 90 days trading horizon DRB Industrial is expected to generate 2.48 times less return on investment than Cheryong Industrial. But when comparing it to its historical volatility, DRB Industrial Co is 5.37 times less risky than Cheryong Industrial. It trades about 0.45 of its potential returns per unit of risk. Cheryong Industrial CoLtd is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  556,895  in Cheryong Industrial CoLtd on October 25, 2024 and sell it today you would earn a total of  153,105  from holding Cheryong Industrial CoLtd or generate 27.49% return on investment over 90 days.

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

DRB Industrial Co  vs.  Cheryong Industrial CoLtd

DRB Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DRB Industrial Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DRB Industrial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cheryong Industrial CoLtd

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cheryong Industrial CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cheryong Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRB Industrial and Cheryong Industrial

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

The idea behind DRB Industrial Co and Cheryong Industrial CoLtd 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 CEOs Directory module to screen CEOs from public companies around the world.