Correlation Between Daewoo SBI and Daewon Chemical

Can any of the company-specific risk be diversified away by investing in both Daewoo SBI and Daewon Chemical 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 Daewoo SBI and Daewon Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Daewoo SBI SPAC and Daewon Chemical Co, you can compare the effects of market volatilities on Daewoo SBI and Daewon Chemical 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 Daewoo SBI with a short position of Daewon Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo SBI and Daewon Chemical.

Diversification Opportunities for Daewoo SBI and Daewon Chemical

-0.52

Correlation Coefficient

Daewoo SBI  Daewon Chemical

Excellent diversification

The 3 months correlation between Daewoo and Daewon is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo SBI SPAC and Daewon Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon Chemical and Daewoo SBI 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 Daewoo SBI SPAC are associated (or correlated) with Daewon Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewon Chemical has no effect on the direction of Daewoo SBI i.e., Daewoo SBI and Daewon Chemical go up and down completely randomly.

Pair Corralation between Daewoo SBI and Daewon Chemical

Assuming the 90 days trading horizon Daewoo SBI SPAC is expected to generate 0.65 times more return on investment than Daewon Chemical. However, Daewoo SBI SPAC is 1.53 times less risky than Daewon Chemical. It trades about 0.04 of its potential returns per unit of risk. Daewon Chemical Co is currently generating about 0.02 per unit of risk. If you would invest  261,000  in Daewoo SBI SPAC on October 25, 2024 and sell it today you would earn a total of  12,500  from holding Daewoo SBI SPAC or generate 4.79% return on investment over 90 days.

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

Daewoo SBI SPAC  vs.  Daewon Chemical Co

Daewoo SBI SPAC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daewoo SBI SPAC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daewoo SBI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Daewon Chemical

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daewon Chemical Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daewon Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Daewoo SBI and Daewon Chemical

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

The idea behind Daewoo SBI SPAC and Daewon Chemical 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.