Correlation Between Dream Security and Songwon Industrial

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

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

Diversification Opportunities for Dream Security and Songwon Industrial

0.47

Correlation Coefficient

Dream Security  Songwon Industrial

Very weak diversification

The 3 months correlation between Dream and Songwon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dream Security co and Songwon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Songwon Industrial and Dream Security 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 Dream Security co are associated (or correlated) with Songwon Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Songwon Industrial has no effect on the direction of Dream Security i.e., Dream Security and Songwon Industrial go up and down completely randomly.

Pair Corralation between Dream Security and Songwon Industrial

Assuming the 90 days trading horizon Dream Security co is expected to generate 0.71 times more return on investment than Songwon Industrial. However, Dream Security co is 1.42 times less risky than Songwon Industrial. It trades about 0.07 of its potential returns per unit of risk. Songwon Industrial Co is currently generating about -0.03 per unit of risk. If you would invest  302,000  in Dream Security co on September 3, 2024 and sell it today you would earn a total of  25,000  from holding Dream Security co or generate 8.28% return on investment over 90 days.

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

Dream Security co  vs.  Songwon Industrial Co

Dream Security co

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dream Security may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Songwon Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Songwon Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Songwon Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dream Security and Songwon Industrial

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

The idea behind Dream Security co and Songwon Industrial 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.