Correlation Between Incar Financial and Daejung Chemicals

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

By analyzing existing cross correlation between Incar Financial Service and Daejung Chemicals Metals, you can compare the effects of market volatilities on Incar Financial and Daejung Chemicals 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 Incar Financial with a short position of Daejung Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Incar Financial and Daejung Chemicals.

Diversification Opportunities for Incar Financial and Daejung Chemicals

-0.31

Correlation Coefficient

Incar Financial  Daejung Chemicals

Very good diversification

The 3 months correlation between Incar and Daejung is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Incar Financial Service and Daejung Chemicals Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejung Chemicals Metals and Incar Financial 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 Incar Financial Service are associated (or correlated) with Daejung Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejung Chemicals Metals has no effect on the direction of Incar Financial i.e., Incar Financial and Daejung Chemicals go up and down completely randomly.

Pair Corralation between Incar Financial and Daejung Chemicals

Assuming the 90 days trading horizon Incar Financial Service is expected to generate 2.85 times more return on investment than Daejung Chemicals. However, Incar Financial is 2.85 times more volatile than Daejung Chemicals Metals. It trades about 0.14 of its potential returns per unit of risk. Daejung Chemicals Metals is currently generating about -0.04 per unit of risk. If you would invest  542,113  in Incar Financial Service on December 24, 2024 and sell it today you would earn a total of  115,887  from holding Incar Financial Service or generate 21.38% return on investment over 90 days.

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

Incar Financial Service  vs.  Daejung Chemicals Metals

Incar Financial Service

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Incar Financial Service are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Incar Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Daejung Chemicals Metals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Incar Financial and Daejung Chemicals

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

The idea behind Incar Financial Service and Daejung Chemicals Metals 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..