Correlation Between Jeju Beer and Dongwon System

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

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

Diversification Opportunities for Jeju Beer and Dongwon System

-0.02

Correlation Coefficient

Jeju Beer  Dongwon System

Good diversification

The 3 months correlation between Jeju and Dongwon is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System and Jeju Beer 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 Jeju Beer Co are associated (or correlated) with Dongwon System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon System has no effect on the direction of Jeju Beer i.e., Jeju Beer and Dongwon System go up and down completely randomly.

Pair Corralation between Jeju Beer and Dongwon System

Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the Dongwon System. In addition to that, Jeju Beer is 1.56 times more volatile than Dongwon System. It trades about -0.02 of its total potential returns per unit of risk. Dongwon System is currently generating about 0.04 per unit of volatility. If you would invest  3,191,284  in Dongwon System on October 4, 2024 and sell it today you would earn a total of  768,716  from holding Dongwon System or generate 24.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.69%
Values	Daily Returns

Jeju Beer Co  vs.  Dongwon System

Jeju Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeju Beer Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jeju Beer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dongwon System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongwon System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongwon System is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jeju Beer and Dongwon System

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

The idea behind Jeju Beer Co and Dongwon System 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.