Correlation Between Dongwon System and System

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

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

Diversification Opportunities for Dongwon System and System

-0.1

Correlation Coefficient

Dongwon System  System

Good diversification

The 3 months correlation between Dongwon and System is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application 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 System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of Dongwon System i.e., Dongwon System and System go up and down completely randomly.

Pair Corralation between Dongwon System and System

Assuming the 90 days trading horizon Dongwon System is expected to generate 1.63 times less return on investment than System. But when comparing it to its historical volatility, Dongwon System is 1.09 times less risky than System. It trades about 0.04 of its potential returns per unit of risk. System and Application is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  153,200  in System and Application on September 13, 2024 and sell it today you would earn a total of  13,300  from holding System and Application or generate 8.68% 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.  System and Application

Dongwon System

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwon System are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwon System may actually be approaching a critical reversion point that can send shares even higher in January 2025.

System and Application

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in System and Application are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, System sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongwon System and System

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

The idea behind Dongwon System and System and Application 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.