Correlation Between Top Material and Daelim Trading

Can any of the company-specific risk be diversified away by investing in both Top Material and Daelim Trading 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 Top Material and Daelim Trading into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Top Material Co and Daelim Trading Co, you can compare the effects of market volatilities on Top Material and Daelim Trading 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 Top Material with a short position of Daelim Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Material and Daelim Trading.

Diversification Opportunities for Top Material and Daelim Trading

0.67

Correlation Coefficient

Top Material  Daelim Trading

Poor diversification

The 3 months correlation between Top and Daelim is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and Daelim Trading Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daelim Trading and Top Material 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 Top Material Co are associated (or correlated) with Daelim Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daelim Trading has no effect on the direction of Top Material i.e., Top Material and Daelim Trading go up and down completely randomly.

Pair Corralation between Top Material and Daelim Trading

Assuming the 90 days trading horizon Top Material Co is expected to generate 1.78 times more return on investment than Daelim Trading. However, Top Material is 1.78 times more volatile than Daelim Trading Co. It trades about 0.08 of its potential returns per unit of risk. Daelim Trading Co is currently generating about 0.0 per unit of risk. If you would invest  2,685,000  in Top Material Co on October 6, 2024 and sell it today you would earn a total of  150,000  from holding Top Material Co or generate 5.59% return on investment over 90 days.

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

Top Material Co  vs.  Daelim Trading Co

Top Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Material Co 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.

Daelim Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daelim Trading Co 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.

Pair Trading with Top Material and Daelim Trading

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

The idea behind Top Material Co and Daelim Trading 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.