Correlation Between Daishin Balance and Korea Electronic

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

Diversification Opportunities for Daishin Balance and Korea Electronic

0.86

Correlation Coefficient

Daishin Balance  Korea Electronic

Very poor diversification

The 3 months correlation between Daishin and Korea is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and Korea Electronic Certification in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electronic Cer 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 Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electronic Cer has no effect on the direction of Daishin Balance i.e., Daishin Balance and Korea Electronic go up and down completely randomly.

Pair Corralation between Daishin Balance and Korea Electronic

Assuming the 90 days trading horizon Daishin Balance No8 is expected to generate 1.63 times more return on investment than Korea Electronic. However, Daishin Balance is 1.63 times more volatile than Korea Electronic Certification. It trades about 0.01 of its potential returns per unit of risk. Korea Electronic Certification is currently generating about -0.02 per unit of risk. If you would invest  589,000  in Daishin Balance No8 on October 22, 2024 and sell it today you would lose (18,000) from holding Daishin Balance No8 or give up 3.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Daishin Balance No8  vs.  Korea Electronic Certification

Daishin Balance No8

Risk-Adjusted Performance

0 of 100

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 Electronic Cer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Electronic Certification has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Korea Electronic 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 Electronic

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

The idea behind Daishin Balance No8 and Korea Electronic Certification 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.