Correlation Between Dream Security and Jeju Bank

Can any of the company-specific risk be diversified away by investing in both Dream Security and Jeju Bank 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 Jeju Bank 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 Jeju Bank, you can compare the effects of market volatilities on Dream Security and Jeju Bank 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 Jeju Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Security and Jeju Bank.

Diversification Opportunities for Dream Security and Jeju Bank

0.73

Correlation Coefficient

Dream Security  Jeju Bank

Poor diversification

The 3 months correlation between Dream and Jeju is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dream Security co and Jeju Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Bank 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 Jeju Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Bank has no effect on the direction of Dream Security i.e., Dream Security and Jeju Bank go up and down completely randomly.

Pair Corralation between Dream Security and Jeju Bank

Assuming the 90 days trading horizon Dream Security co is expected to under-perform the Jeju Bank. In addition to that, Dream Security is 2.86 times more volatile than Jeju Bank. It trades about -0.1 of its total potential returns per unit of risk. Jeju Bank is currently generating about -0.14 per unit of volatility. If you would invest  819,235  in Jeju Bank on December 31, 2024 and sell it today you would lose (63,235) from holding Jeju Bank or give up 7.72% of portfolio value over 90 days.

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

Dream Security co  vs.  Jeju Bank

Dream Security co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dream Security 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 May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Jeju Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jeju Bank 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.

Pair Trading with Dream Security and Jeju Bank

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

The idea behind Dream Security co and Jeju Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..