Correlation Between DeviceENGCOLtd and Korea Environment

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

By analyzing existing cross correlation between DeviceENGCOLtd and Korea Environment Technology, you can compare the effects of market volatilities on DeviceENGCOLtd and Korea Environment 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 DeviceENGCOLtd with a short position of Korea Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of DeviceENGCOLtd and Korea Environment.

Diversification Opportunities for DeviceENGCOLtd and Korea Environment

-0.76

Correlation Coefficient

DeviceENGCOLtd  Korea Environment

Pay attention - limited upside

The 3 months correlation between DeviceENGCOLtd and Korea is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding DeviceENGCOLtd and Korea Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Environment and DeviceENGCOLtd 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 DeviceENGCOLtd are associated (or correlated) with Korea Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Environment has no effect on the direction of DeviceENGCOLtd i.e., DeviceENGCOLtd and Korea Environment go up and down completely randomly.

Pair Corralation between DeviceENGCOLtd and Korea Environment

Assuming the 90 days trading horizon DeviceENGCOLtd is expected to under-perform the Korea Environment. In addition to that, DeviceENGCOLtd is 1.64 times more volatile than Korea Environment Technology. It trades about -0.01 of its total potential returns per unit of risk. Korea Environment Technology is currently generating about 0.06 per unit of volatility. If you would invest  641,683  in Korea Environment Technology on October 4, 2024 and sell it today you would earn a total of  258,317  from holding Korea Environment Technology or generate 40.26% return on investment over 90 days.

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

DeviceENGCOLtd  vs.  Korea Environment Technology

DeviceENGCOLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DeviceENGCOLtd 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.

Korea Environment

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Environment Technology are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DeviceENGCOLtd and Korea Environment

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

The idea behind DeviceENGCOLtd and Korea Environment Technology 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.