Correlation Between Damsan JSC and Asia Pacific

Can any of the company-specific risk be diversified away by investing in both Damsan JSC and Asia Pacific 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 Damsan JSC and Asia Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Damsan JSC and Asia Pacific Investment, you can compare the effects of market volatilities on Damsan JSC and Asia Pacific 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 Damsan JSC with a short position of Asia Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Damsan JSC and Asia Pacific.

Diversification Opportunities for Damsan JSC and Asia Pacific

-0.05

Correlation Coefficient

Damsan JSC  Asia Pacific

Good diversification

The 3 months correlation between Damsan and Asia is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Damsan JSC and Asia Pacific Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Investment and Damsan JSC 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 Damsan JSC are associated (or correlated) with Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Investment has no effect on the direction of Damsan JSC i.e., Damsan JSC and Asia Pacific go up and down completely randomly.

Pair Corralation between Damsan JSC and Asia Pacific

Assuming the 90 days trading horizon Damsan JSC is expected to generate 1.04 times more return on investment than Asia Pacific. However, Damsan JSC is 1.04 times more volatile than Asia Pacific Investment. It trades about 0.06 of its potential returns per unit of risk. Asia Pacific Investment is currently generating about -0.12 per unit of risk. If you would invest  881,000  in Damsan JSC on December 28, 2024 and sell it today you would earn a total of  41,000  from holding Damsan JSC or generate 4.65% return on investment over 90 days.

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

Damsan JSC  vs.  Asia Pacific Investment

Damsan JSC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Damsan JSC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Damsan JSC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Asia Pacific Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asia Pacific Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Damsan JSC and Asia Pacific

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

The idea behind Damsan JSC and Asia Pacific Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.