Correlation Between Construction JSC and Dong A

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

By analyzing existing cross correlation between Construction JSC No5 and Dong A Hotel, you can compare the effects of market volatilities on Construction JSC 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 Construction JSC with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Construction JSC and Dong A.

Diversification Opportunities for Construction JSC and Dong A

0.18

Correlation Coefficient

Construction JSC  Dong A

Average diversification

The 3 months correlation between Construction and Dong is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Construction JSC No5 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 Construction 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 Construction JSC No5 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 Construction JSC i.e., Construction JSC and Dong A go up and down completely randomly.

Pair Corralation between Construction JSC and Dong A

Assuming the 90 days trading horizon Construction JSC No5 is expected to under-perform the Dong A. In addition to that, Construction JSC is 2.18 times more volatile than Dong A Hotel. It trades about -0.11 of its total potential returns per unit of risk. Dong A Hotel is currently generating about 0.03 per unit of volatility. If you would invest  333,000  in Dong A Hotel on December 30, 2024 and sell it today you would earn a total of  10,000  from holding Dong A Hotel or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	56.67%
Values	Daily Returns

Construction JSC No5  vs.  Dong A Hotel

Construction JSC No5

Risk-Adjusted Performance

Very Weak

Over the last 90 days Construction JSC No5 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dong A Hotel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Hotel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Construction JSC and Dong A

The main advantage of trading using opposite Construction JSC and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Construction JSC 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 Construction JSC No5 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 Global Correlations module to find global opportunities by holding instruments from different markets.