Correlation Between Top Material and Dongwoon Anatech

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

Diversification Opportunities for Top Material and Dongwoon Anatech

0.03

Correlation Coefficient

Top Material  Dongwoon Anatech

Significant diversification

The 3 months correlation between Top and Dongwoon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Top Material Co and Dongwoon Anatech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoon Anatech 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 Dongwoon Anatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoon Anatech has no effect on the direction of Top Material i.e., Top Material and Dongwoon Anatech go up and down completely randomly.

Pair Corralation between Top Material and Dongwoon Anatech

Assuming the 90 days trading horizon Top Material is expected to generate 2.6 times less return on investment than Dongwoon Anatech. In addition to that, Top Material is 1.23 times more volatile than Dongwoon Anatech Co. It trades about 0.08 of its total potential returns per unit of risk. Dongwoon Anatech Co is currently generating about 0.27 per unit of volatility. If you would invest  1,605,219  in Dongwoon Anatech Co on October 6, 2024 and sell it today you would earn a total of  309,781  from holding Dongwoon Anatech Co or generate 19.3% return on investment over 90 days.

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

Top Material Co  vs.  Dongwoon Anatech 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.

Dongwoon Anatech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwoon Anatech Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwoon Anatech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Top Material and Dongwoon Anatech

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

The idea behind Top Material Co and Dongwoon Anatech 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.