Correlation Between Daekyung Machinery and Samlip General

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

By analyzing existing cross correlation between Daekyung Machinery Engineering and Samlip General Foods, you can compare the effects of market volatilities on Daekyung Machinery and Samlip General 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 Daekyung Machinery with a short position of Samlip General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daekyung Machinery and Samlip General.

Diversification Opportunities for Daekyung Machinery and Samlip General

-0.16

Correlation Coefficient

Daekyung Machinery  Samlip General

Good diversification

The 3 months correlation between Daekyung and Samlip is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Daekyung Machinery Engineering and Samlip General Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samlip General Foods and Daekyung Machinery 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 Daekyung Machinery Engineering are associated (or correlated) with Samlip General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samlip General Foods has no effect on the direction of Daekyung Machinery i.e., Daekyung Machinery and Samlip General go up and down completely randomly.

Pair Corralation between Daekyung Machinery and Samlip General

Assuming the 90 days trading horizon Daekyung Machinery Engineering is expected to generate 2.23 times more return on investment than Samlip General. However, Daekyung Machinery is 2.23 times more volatile than Samlip General Foods. It trades about 0.16 of its potential returns per unit of risk. Samlip General Foods is currently generating about -0.09 per unit of risk. If you would invest  41,300  in Daekyung Machinery Engineering on September 12, 2024 and sell it today you would earn a total of  10,200  from holding Daekyung Machinery Engineering or generate 24.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.48%
Values	Daily Returns

Daekyung Machinery Engineering  vs.  Samlip General Foods

Daekyung Machinery

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Daekyung Machinery Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Daekyung Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Samlip General Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samlip General Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Daekyung Machinery and Samlip General

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

The idea behind Daekyung Machinery Engineering and Samlip General Foods 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.