Correlation Between Da Cin and LK Engineering

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

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

Diversification Opportunities for Da Cin and LK Engineering

-0.35

Correlation Coefficient

Da Cin  LK Engineering

Very good diversification

The 3 months correlation between 2535 and 6139 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Da Cin Construction Co and LK Engineering Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LK Engineering and Da Cin 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 Da Cin Construction Co are associated (or correlated) with LK Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LK Engineering has no effect on the direction of Da Cin i.e., Da Cin and LK Engineering go up and down completely randomly.

Pair Corralation between Da Cin and LK Engineering

Assuming the 90 days trading horizon Da Cin is expected to generate 3.14 times less return on investment than LK Engineering. But when comparing it to its historical volatility, Da Cin Construction Co is 2.17 times less risky than LK Engineering. It trades about 0.08 of its potential returns per unit of risk. LK Engineering Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,135  in LK Engineering Co on October 11, 2024 and sell it today you would earn a total of  19,415  from holding LK Engineering Co or generate 469.53% return on investment over 90 days.

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

Da Cin Construction Co  vs.  LK Engineering Co

Da Cin Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Da Cin Construction Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Da Cin may actually be approaching a critical reversion point that can send shares even higher in February 2025.

LK Engineering

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LK Engineering Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LK Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Da Cin and LK Engineering

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

The idea behind Da Cin Construction Co and LK Engineering 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.