Correlation Between Osteonic and Daewon Chemical

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

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

Diversification Opportunities for Osteonic and Daewon Chemical

-0.01

Correlation Coefficient

Osteonic  Daewon Chemical

Good diversification

The 3 months correlation between Osteonic and Daewon is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Osteonic Co and Daewon Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewon Chemical and Osteonic 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 Osteonic Co 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 Osteonic i.e., Osteonic and Daewon Chemical go up and down completely randomly.

Pair Corralation between Osteonic and Daewon Chemical

Assuming the 90 days trading horizon Osteonic Co is expected to generate 1.98 times more return on investment than Daewon Chemical. However, Osteonic is 1.98 times more volatile than Daewon Chemical Co. It trades about 0.43 of its potential returns per unit of risk. Daewon Chemical Co is currently generating about 0.21 per unit of risk. If you would invest  554,000  in Osteonic Co on October 9, 2024 and sell it today you would earn a total of  122,000  from holding Osteonic Co or generate 22.02% return on investment over 90 days.

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

Osteonic Co  vs.  Daewon Chemical Co

Osteonic

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Osteonic Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Osteonic sustained solid returns over the last few months and may actually be approaching a breakup point.

Daewon Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daewon Chemical Co 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 Osteonic and Daewon Chemical

The main advantage of trading using opposite Osteonic and Daewon Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Osteonic 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 Osteonic Co 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.