Correlation Between CEO Group and Dong A

Can any of the company-specific risk be diversified away by investing in both CEO Group and Dong A 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 CEO Group and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CEO Group JSC and Dong A Hotel, you can compare the effects of market volatilities on CEO Group and Dong A 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 CEO Group with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEO Group and Dong A.

Diversification Opportunities for CEO Group and Dong A

-0.47

Correlation Coefficient

CEO Group  Dong A

Very good diversification

The 3 months correlation between CEO and Dong is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CEO Group JSC and Dong A Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Hotel and CEO Group 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 CEO Group JSC are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Hotel has no effect on the direction of CEO Group i.e., CEO Group and Dong A go up and down completely randomly.

Pair Corralation between CEO Group and Dong A

Assuming the 90 days trading horizon CEO Group JSC is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, CEO Group JSC is 1.7 times less risky than Dong A. The stock trades about -0.19 of its potential returns per unit of risk. The Dong A Hotel is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  306,000  in Dong A Hotel on October 6, 2024 and sell it today you would earn a total of  55,000  from holding Dong A Hotel or generate 17.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

CEO Group JSC  vs.  Dong A Hotel

CEO Group JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CEO Group JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Dong A Hotel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Hotel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Dong A may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CEO Group and Dong A

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

The idea behind CEO Group JSC and Dong A Hotel 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.