Correlation Between Dongwon System and NHN KCP

Can any of the company-specific risk be diversified away by investing in both Dongwon System and NHN KCP 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 Dongwon System and NHN KCP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dongwon System and NHN KCP Corp, you can compare the effects of market volatilities on Dongwon System and NHN KCP 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 Dongwon System with a short position of NHN KCP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwon System and NHN KCP.

Diversification Opportunities for Dongwon System and NHN KCP

-0.22

Correlation Coefficient

Dongwon System  NHN KCP

Very good diversification

The 3 months correlation between Dongwon and NHN is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and NHN KCP Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NHN KCP Corp and Dongwon System 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 Dongwon System are associated (or correlated) with NHN KCP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NHN KCP Corp has no effect on the direction of Dongwon System i.e., Dongwon System and NHN KCP go up and down completely randomly.

Pair Corralation between Dongwon System and NHN KCP

Assuming the 90 days trading horizon Dongwon System is expected to generate 3.12 times less return on investment than NHN KCP. In addition to that, Dongwon System is 1.29 times more volatile than NHN KCP Corp. It trades about 0.03 of its total potential returns per unit of risk. NHN KCP Corp is currently generating about 0.1 per unit of volatility. If you would invest  726,000  in NHN KCP Corp on September 15, 2024 and sell it today you would earn a total of  104,000  from holding NHN KCP Corp or generate 14.33% return on investment over 90 days.

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

Dongwon System  vs.  NHN KCP Corp

Dongwon System

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwon System are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongwon System is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NHN KCP Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NHN KCP Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NHN KCP sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongwon System and NHN KCP

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

The idea behind Dongwon System and NHN KCP Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.