Correlation Between Dong A and Riverway Management

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

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

Diversification Opportunities for Dong A and Riverway Management

0.76

Correlation Coefficient

Dong A  Riverway Management

Poor diversification

The 3 months correlation between Dong and Riverway is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Hotel and Riverway Management JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverway Management JSC and Dong A 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 Dong A Hotel are associated (or correlated) with Riverway Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverway Management JSC has no effect on the direction of Dong A i.e., Dong A and Riverway Management go up and down completely randomly.

Pair Corralation between Dong A and Riverway Management

Assuming the 90 days trading horizon Dong A is expected to generate 8.95 times less return on investment than Riverway Management. But when comparing it to its historical volatility, Dong A Hotel is 4.14 times less risky than Riverway Management. It trades about 0.03 of its potential returns per unit of risk. Riverway Management JSC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  500,000  in Riverway Management JSC on September 17, 2024 and sell it today you would earn a total of  10,000  from holding Riverway Management JSC or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

Dong A Hotel  vs.  Riverway Management JSC

Dong A Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong A Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Dong A is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Riverway Management JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riverway Management JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dong A and Riverway Management

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

The idea behind Dong A Hotel and Riverway Management 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.