Correlation Between Jeju Beer and DataSolution

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

Diversification Opportunities for Jeju Beer and DataSolution

0.04

Correlation Coefficient

Jeju Beer  DataSolution

Significant diversification

The 3 months correlation between Jeju and DataSolution is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Beer Co and DataSolution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DataSolution 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 DataSolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DataSolution has no effect on the direction of Jeju Beer i.e., Jeju Beer and DataSolution go up and down completely randomly.

Pair Corralation between Jeju Beer and DataSolution

Assuming the 90 days trading horizon Jeju Beer Co is expected to under-perform the DataSolution. But the stock apears to be less risky and, when comparing its historical volatility, Jeju Beer Co is 1.12 times less risky than DataSolution. The stock trades about -0.25 of its potential returns per unit of risk. The DataSolution is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  440,500  in DataSolution on October 25, 2024 and sell it today you would earn a total of  62,500  from holding DataSolution or generate 14.19% return on investment over 90 days.

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

Jeju Beer Co  vs.  DataSolution

Jeju Beer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

DataSolution

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DataSolution are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DataSolution sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jeju Beer and DataSolution

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

The idea behind Jeju Beer Co and DataSolution 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.