Correlation Between Iljin Materials and Dongwoo Farm

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

By analyzing existing cross correlation between Iljin Materials Co and Dongwoo Farm To, you can compare the effects of market volatilities on Iljin Materials and Dongwoo Farm 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 Iljin Materials with a short position of Dongwoo Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iljin Materials and Dongwoo Farm.

Diversification Opportunities for Iljin Materials and Dongwoo Farm

0.87

Correlation Coefficient

Iljin Materials  Dongwoo Farm

Very poor diversification

The 3 months correlation between Iljin and Dongwoo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Iljin Materials Co and Dongwoo Farm To in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwoo Farm To and Iljin Materials 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 Iljin Materials Co are associated (or correlated) with Dongwoo Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwoo Farm To has no effect on the direction of Iljin Materials i.e., Iljin Materials and Dongwoo Farm go up and down completely randomly.

Pair Corralation between Iljin Materials and Dongwoo Farm

Assuming the 90 days trading horizon Iljin Materials Co is expected to under-perform the Dongwoo Farm. In addition to that, Iljin Materials is 2.58 times more volatile than Dongwoo Farm To. It trades about -0.26 of its total potential returns per unit of risk. Dongwoo Farm To is currently generating about -0.08 per unit of volatility. If you would invest  204,000  in Dongwoo Farm To on September 13, 2024 and sell it today you would lose (13,000) from holding Dongwoo Farm To or give up 6.37% of portfolio value over 90 days.

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

Iljin Materials Co  vs.  Dongwoo Farm To

Iljin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iljin Materials Co 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.

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongwoo Farm To 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 Iljin Materials and Dongwoo Farm

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

The idea behind Iljin Materials Co and Dongwoo Farm To 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 Stocks Directory module to find actively traded stocks across global markets.