Correlation Between Daishin Balance and WOOJUNG BIO

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

Diversification Opportunities for Daishin Balance and WOOJUNG BIO

0.94

Correlation Coefficient

Daishin Balance  WOOJUNG BIO

Almost no diversification

The 3 months correlation between Daishin and WOOJUNG is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance No8 and WOOJUNG BIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOOJUNG BIO 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 WOOJUNG BIO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOOJUNG BIO has no effect on the direction of Daishin Balance i.e., Daishin Balance and WOOJUNG BIO go up and down completely randomly.

Pair Corralation between Daishin Balance and WOOJUNG BIO

Assuming the 90 days trading horizon Daishin Balance No8 is expected to generate 0.98 times more return on investment than WOOJUNG BIO. However, Daishin Balance No8 is 1.02 times less risky than WOOJUNG BIO. It trades about -0.04 of its potential returns per unit of risk. WOOJUNG BIO is currently generating about -0.06 per unit of risk. If you would invest  619,000  in Daishin Balance No8 on October 13, 2024 and sell it today you would lose (77,000) from holding Daishin Balance No8 or give up 12.44% of portfolio value over 90 days.

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

Daishin Balance No8  vs.  WOOJUNG BIO

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

WOOJUNG BIO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WOOJUNG BIO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daishin Balance and WOOJUNG BIO

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

The idea behind Daishin Balance No8 and WOOJUNG BIO 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.