Correlation Between Korea Alcohol and Daol Investment

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

By analyzing existing cross correlation between Korea Alcohol Industrial and Daol Investment Securities, you can compare the effects of market volatilities on Korea Alcohol and Daol Investment 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 Korea Alcohol with a short position of Daol Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Alcohol and Daol Investment.

Diversification Opportunities for Korea Alcohol and Daol Investment

0.79

Correlation Coefficient

Korea Alcohol  Daol Investment

Poor diversification

The 3 months correlation between Korea and Daol is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Korea Alcohol Industrial and Daol Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daol Investment Secu and Korea Alcohol 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 Korea Alcohol Industrial are associated (or correlated) with Daol Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daol Investment Secu has no effect on the direction of Korea Alcohol i.e., Korea Alcohol and Daol Investment go up and down completely randomly.

Pair Corralation between Korea Alcohol and Daol Investment

Assuming the 90 days trading horizon Korea Alcohol Industrial is expected to under-perform the Daol Investment. But the stock apears to be less risky and, when comparing its historical volatility, Korea Alcohol Industrial is 1.31 times less risky than Daol Investment. The stock trades about -0.15 of its potential returns per unit of risk. The Daol Investment Securities is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  304,500  in Daol Investment Securities on September 23, 2024 and sell it today you would earn a total of  3,000  from holding Daol Investment Securities or generate 0.99% return on investment over 90 days.

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

Korea Alcohol Industrial  vs.  Daol Investment Securities

Korea Alcohol Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Alcohol Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daol Investment Secu

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Korea Alcohol and Daol Investment

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

The idea behind Korea Alcohol Industrial and Daol Investment Securities 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.