Correlation Between SMC Investment and Dong A

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

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

Diversification Opportunities for SMC Investment and Dong A

0.72

Correlation Coefficient

SMC Investment  Dong A

Poor diversification

The 3 months correlation between SMC and Dong is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SMC Investment Trading 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 SMC Investment 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 SMC Investment Trading 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 SMC Investment i.e., SMC Investment and Dong A go up and down completely randomly.

Pair Corralation between SMC Investment and Dong A

Assuming the 90 days trading horizon SMC Investment Trading is expected to generate 1.5 times more return on investment than Dong A. However, SMC Investment is 1.5 times more volatile than Dong A Hotel. It trades about 0.0 of its potential returns per unit of risk. Dong A Hotel is currently generating about -0.02 per unit of risk. If you would invest  1,060,000  in SMC Investment Trading on October 4, 2024 and sell it today you would lose (224,000) from holding SMC Investment Trading or give up 21.13% of portfolio value over 90 days.

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

SMC Investment Trading  vs.  Dong A Hotel

SMC Investment Trading

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Dong A Hotel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Hotel are ranked lower than 5 (%) 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 SMC Investment and Dong A

The main advantage of trading using opposite SMC Investment and Dong A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Investment 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 SMC Investment Trading 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.