Correlation Between Design and Korea Environment

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

By analyzing existing cross correlation between Design Co and Korea Environment Technology, you can compare the effects of market volatilities on Design and Korea Environment 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 Korea Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Design and Korea Environment.

Diversification Opportunities for Design and Korea Environment

-0.65

Correlation Coefficient

Design  Korea Environment

Excellent diversification

The 3 months correlation between Design and Korea is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Design Co and Korea Environment Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Environment 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 Korea Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Environment has no effect on the direction of Design i.e., Design and Korea Environment go up and down completely randomly.

Pair Corralation between Design and Korea Environment

Assuming the 90 days trading horizon Design Co is expected to under-perform the Korea Environment. In addition to that, Design is 5.29 times more volatile than Korea Environment Technology. It trades about -0.35 of its total potential returns per unit of risk. Korea Environment Technology is currently generating about 0.27 per unit of volatility. If you would invest  841,828  in Korea Environment Technology on October 1, 2024 and sell it today you would earn a total of  59,172  from holding Korea Environment Technology or generate 7.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Design Co  vs.  Korea Environment Technology

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.

Korea Environment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Environment Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Korea Environment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Design and Korea Environment

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

The idea behind Design Co and Korea Environment Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.