Correlation Between Damsan JSC and MST Investment

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

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

Diversification Opportunities for Damsan JSC and MST Investment

-0.44

Correlation Coefficient

Damsan JSC  MST Investment

Very good diversification

The 3 months correlation between Damsan and MST is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Damsan JSC and MST Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MST Investment JSC 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 MST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MST Investment JSC has no effect on the direction of Damsan JSC i.e., Damsan JSC and MST Investment go up and down completely randomly.

Pair Corralation between Damsan JSC and MST Investment

Assuming the 90 days trading horizon Damsan JSC is expected to under-perform the MST Investment. But the stock apears to be less risky and, when comparing its historical volatility, Damsan JSC is 1.6 times less risky than MST Investment. The stock trades about -0.08 of its potential returns per unit of risk. The MST Investment JSC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  510,000  in MST Investment JSC on September 14, 2024 and sell it today you would earn a total of  160,000  from holding MST Investment JSC or generate 31.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Damsan JSC  vs.  MST Investment JSC

Damsan JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

MST Investment JSC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MST Investment JSC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MST Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Damsan JSC and MST Investment

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

The idea behind Damsan JSC and MST Investment JSC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.