Correlation Between Design and DongWon Development

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

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

Diversification Opportunities for Design and DongWon Development

0.36

Correlation Coefficient

Design  DongWon Development

Weak diversification

The 3 months correlation between Design and DongWon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Design Co and DongWon Development CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DongWon Development CoLtd and Design 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 Design Co are associated (or correlated) with DongWon Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DongWon Development CoLtd has no effect on the direction of Design i.e., Design and DongWon Development go up and down completely randomly.

Pair Corralation between Design and DongWon Development

Assuming the 90 days trading horizon Design Co is expected to under-perform the DongWon Development. In addition to that, Design is 5.7 times more volatile than DongWon Development CoLtd. It trades about -0.14 of its total potential returns per unit of risk. DongWon Development CoLtd is currently generating about -0.06 per unit of volatility. If you would invest  252,000  in DongWon Development CoLtd on September 25, 2024 and sell it today you would lose (9,500) from holding DongWon Development CoLtd or give up 3.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Design Co  vs.  DongWon Development CoLtd

Design

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Design Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DongWon Development CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DongWon Development CoLtd 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 Design and DongWon Development

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

The idea behind Design Co and DongWon Development CoLtd 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.