Correlation Between Dream Security and GS Engineering

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

Diversification Opportunities for Dream Security and GS Engineering

-0.26

Correlation Coefficient

Dream Security  GS Engineering

Very good diversification

The 3 months correlation between Dream and 006360 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dream Security co and GS Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GS Engineering Const 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 GS Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GS Engineering Const has no effect on the direction of Dream Security i.e., Dream Security and GS Engineering go up and down completely randomly.

Pair Corralation between Dream Security and GS Engineering

Assuming the 90 days trading horizon Dream Security co is expected to generate 1.58 times more return on investment than GS Engineering. However, Dream Security is 1.58 times more volatile than GS Engineering Construction. It trades about 0.03 of its potential returns per unit of risk. GS Engineering Construction is currently generating about -0.04 per unit of risk. If you would invest  332,500  in Dream Security co on December 2, 2024 and sell it today you would earn a total of  5,500  from holding Dream Security co or generate 1.65% return on investment over 90 days.

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

Dream Security co  vs.  GS Engineering Construction

Dream Security co

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 2 (%) 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 April 2025.

GS Engineering Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days GS Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GS Engineering 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 GS Engineering

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

The idea behind Dream Security co and GS Engineering Construction 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.