Correlation Between Daishin Balance and Korea Real

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

By analyzing existing cross correlation between Daishin Balance No8 and Korea Real Estate, you can compare the effects of market volatilities on Daishin Balance and Korea Real 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 Daishin Balance with a short position of Korea Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Balance and Korea Real.

Diversification Opportunities for Daishin Balance and Korea Real

0.09

Correlation Coefficient

Daishin Balance  Korea Real

Significant diversification

The 3 months correlation between Daishin and Korea is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and Korea Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Real Estate and Daishin Balance 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 Daishin Balance No8 are associated (or correlated) with Korea Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Real Estate has no effect on the direction of Daishin Balance i.e., Daishin Balance and Korea Real go up and down completely randomly.

Pair Corralation between Daishin Balance and Korea Real

Assuming the 90 days trading horizon Daishin Balance No8 is expected to generate 3.98 times more return on investment than Korea Real. However, Daishin Balance is 3.98 times more volatile than Korea Real Estate. It trades about 0.35 of its potential returns per unit of risk. Korea Real Estate is currently generating about -0.22 per unit of risk. If you would invest  445,000  in Daishin Balance No8 on October 22, 2024 and sell it today you would earn a total of  126,000  from holding Daishin Balance No8 or generate 28.31% return on investment over 90 days.

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

Daishin Balance No8  vs.  Korea Real Estate

Daishin Balance No8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daishin Balance No8 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Daishin Balance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Korea Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daishin Balance and Korea Real

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

The idea behind Daishin Balance No8 and Korea Real Estate 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.