Correlation Between Dream Security and Shinsegae Engineering

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

Diversification Opportunities for Dream Security and Shinsegae Engineering

-0.08

Correlation Coefficient

Dream Security  Shinsegae Engineering

Good diversification

The 3 months correlation between Dream and Shinsegae is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dream Security co and Shinsegae Engineering Construc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Engineering 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 Shinsegae Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Engineering has no effect on the direction of Dream Security i.e., Dream Security and Shinsegae Engineering go up and down completely randomly.

Pair Corralation between Dream Security and Shinsegae Engineering

Assuming the 90 days trading horizon Dream Security co is expected to generate 58.08 times more return on investment than Shinsegae Engineering. However, Dream Security is 58.08 times more volatile than Shinsegae Engineering Construction. It trades about 0.08 of its potential returns per unit of risk. Shinsegae Engineering Construction is currently generating about 0.2 per unit of risk. If you would invest  315,000  in Dream Security co on November 20, 2024 and sell it today you would earn a total of  52,500  from holding Dream Security co or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.7%
Values	Daily Returns

Dream Security co  vs.  Shinsegae Engineering Construc

Dream Security co

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dream Security sustained solid returns over the last few months and may actually be approaching a breakup point.

Shinsegae Engineering

Risk-Adjusted Performance

Good

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

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

The idea behind Dream Security co and Shinsegae 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.