Correlation Between Ray and DHP Korea

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

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

Diversification Opportunities for Ray and DHP Korea

0.88

Correlation Coefficient

Ray  DHP Korea

Very poor diversification

The 3 months correlation between Ray and DHP is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ray Co and DHP Korea Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHP Korea and Ray 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 Ray Co are associated (or correlated) with DHP Korea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHP Korea has no effect on the direction of Ray i.e., Ray and DHP Korea go up and down completely randomly.

Pair Corralation between Ray and DHP Korea

Assuming the 90 days trading horizon Ray Co is expected to under-perform the DHP Korea. In addition to that, Ray is 1.13 times more volatile than DHP Korea Co. It trades about -0.21 of its total potential returns per unit of risk. DHP Korea Co is currently generating about -0.12 per unit of volatility. If you would invest  651,000  in DHP Korea Co on September 4, 2024 and sell it today you would lose (124,000) from holding DHP Korea Co or give up 19.05% of portfolio value over 90 days.

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

Ray Co  vs.  DHP Korea Co

Ray Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ray 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.

DHP Korea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHP Korea 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.

Pair Trading with Ray and DHP Korea

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

The idea behind Ray Co and DHP Korea 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.