Correlation Between Jeju Beer and Dream Security

Can any of the company-specific risk be diversified away by investing in both Jeju Beer and Dream Security 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 Dream Security 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 Dream Security co, you can compare the effects of market volatilities on Jeju Beer and Dream Security 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 Dream Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Beer and Dream Security.

Diversification Opportunities for Jeju Beer and Dream Security

-0.48

Correlation Coefficient

Jeju Beer  Dream Security

Very good diversification

The 3 months correlation between Jeju and Dream is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and Dream Security co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Security co 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 Dream Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Security co has no effect on the direction of Jeju Beer i.e., Jeju Beer and Dream Security go up and down completely randomly.

Pair Corralation between Jeju Beer and Dream Security

Assuming the 90 days trading horizon Jeju Beer Co is expected to generate 1.22 times more return on investment than Dream Security. However, Jeju Beer is 1.22 times more volatile than Dream Security co. It trades about 0.15 of its potential returns per unit of risk. Dream Security co is currently generating about -0.06 per unit of risk. If you would invest  292,000  in Jeju Beer Co on September 1, 2024 and sell it today you would earn a total of  33,000  from holding Jeju Beer Co or generate 11.3% return on investment over 90 days.

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

Jeju Beer Co  vs.  Dream Security co

Jeju Beer

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Beer may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Dream Security co

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dream Security may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Jeju Beer and Dream Security

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

The idea behind Jeju Beer Co and Dream Security 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.