Correlation Between Mobile World and Dong A

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

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

Diversification Opportunities for Mobile World and Dong A

0.01

Correlation Coefficient

Mobile World  Dong A

Significant diversification

The 3 months correlation between Mobile and Dong is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Mobile World Investment 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 Mobile World 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 Mobile World Investment 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 Mobile World i.e., Mobile World and Dong A go up and down completely randomly.

Pair Corralation between Mobile World and Dong A

Assuming the 90 days trading horizon Mobile World Investment is expected to under-perform the Dong A. But the stock apears to be less risky and, when comparing its historical volatility, Mobile World Investment is 2.85 times less risky than Dong A. The stock trades about -0.27 of its potential returns per unit of risk. The Dong A Hotel is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  304,000  in Dong A Hotel on October 8, 2024 and sell it today you would earn a total of  57,000  from holding Dong A Hotel or generate 18.75% return on investment over 90 days.

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

Mobile World Investment  vs.  Dong A Hotel

Mobile World Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mobile World Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental 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 Mobile World and Dong A

The main advantage of trading using opposite Mobile World and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mobile World 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 Mobile World Investment 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.