Correlation Between PI Advanced and Daejoo Electronic

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

By analyzing existing cross correlation between PI Advanced Materials and Daejoo Electronic Materials, you can compare the effects of market volatilities on PI Advanced and Daejoo Electronic 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 PI Advanced with a short position of Daejoo Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of PI Advanced and Daejoo Electronic.

Diversification Opportunities for PI Advanced and Daejoo Electronic

0.55

Correlation Coefficient

PI Advanced  Daejoo Electronic

Very weak diversification

The 3 months correlation between 178920 and Daejoo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PI Advanced Materials and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic and PI Advanced 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 PI Advanced Materials are associated (or correlated) with Daejoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Electronic has no effect on the direction of PI Advanced i.e., PI Advanced and Daejoo Electronic go up and down completely randomly.

Pair Corralation between PI Advanced and Daejoo Electronic

Assuming the 90 days trading horizon PI Advanced is expected to generate 4.73 times less return on investment than Daejoo Electronic. But when comparing it to its historical volatility, PI Advanced Materials is 1.3 times less risky than Daejoo Electronic. It trades about 0.04 of its potential returns per unit of risk. Daejoo Electronic Materials is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,560,000  in Daejoo Electronic Materials on December 25, 2024 and sell it today you would earn a total of  2,630,000  from holding Daejoo Electronic Materials or generate 34.79% return on investment over 90 days.

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

PI Advanced Materials  vs.  Daejoo Electronic Materials

PI Advanced Materials

Risk-Adjusted Performance

Insignificant

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

Daejoo Electronic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daejoo Electronic Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daejoo Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PI Advanced and Daejoo Electronic

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

The idea behind PI Advanced Materials and Daejoo Electronic Materials 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.