Correlation Between Daihan Pharmaceutical and Histeel

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

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

Diversification Opportunities for Daihan Pharmaceutical and Histeel

0.4

Correlation Coefficient

Daihan Pharmaceutical  Histeel

Very weak diversification

The 3 months correlation between Daihan and Histeel is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Daihan Pharmaceutical CoLtd and Histeel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histeel and Daihan Pharmaceutical 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 Daihan Pharmaceutical CoLtd are associated (or correlated) with Histeel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histeel has no effect on the direction of Daihan Pharmaceutical i.e., Daihan Pharmaceutical and Histeel go up and down completely randomly.

Pair Corralation between Daihan Pharmaceutical and Histeel

Assuming the 90 days trading horizon Daihan Pharmaceutical CoLtd is expected to generate 0.32 times more return on investment than Histeel. However, Daihan Pharmaceutical CoLtd is 3.16 times less risky than Histeel. It trades about 0.08 of its potential returns per unit of risk. Histeel is currently generating about -0.02 per unit of risk. If you would invest  2,615,000  in Daihan Pharmaceutical CoLtd on September 3, 2024 and sell it today you would earn a total of  125,000  from holding Daihan Pharmaceutical CoLtd or generate 4.78% return on investment over 90 days.

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

Daihan Pharmaceutical CoLtd  vs.  Histeel

Daihan Pharmaceutical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Daihan Pharmaceutical CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daihan Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Histeel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histeel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Histeel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daihan Pharmaceutical and Histeel

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

The idea behind Daihan Pharmaceutical CoLtd and Histeel 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.