Correlation Between Daedong Metals and Innowireless

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

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

Diversification Opportunities for Daedong Metals and Innowireless

0.48

Correlation Coefficient

Daedong Metals  Innowireless

Very weak diversification

The 3 months correlation between Daedong and Innowireless is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Metals Co and Innowireless Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innowireless and Daedong Metals 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 Daedong Metals Co are associated (or correlated) with Innowireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innowireless has no effect on the direction of Daedong Metals i.e., Daedong Metals and Innowireless go up and down completely randomly.

Pair Corralation between Daedong Metals and Innowireless

Assuming the 90 days trading horizon Daedong Metals Co is expected to generate 3.9 times more return on investment than Innowireless. However, Daedong Metals is 3.9 times more volatile than Innowireless Co. It trades about 0.13 of its potential returns per unit of risk. Innowireless Co is currently generating about 0.17 per unit of risk. If you would invest  622,000  in Daedong Metals Co on September 1, 2024 and sell it today you would earn a total of  120,000  from holding Daedong Metals Co or generate 19.29% return on investment over 90 days.

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

Daedong Metals Co  vs.  Innowireless Co

Daedong Metals

Risk-Adjusted Performance

4 of 100

Insignificant

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

Innowireless

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Innowireless Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Innowireless is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daedong Metals and Innowireless

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

The idea behind Daedong Metals Co and Innowireless Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.