Correlation Between Daol Investment and Korea Computer

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

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

Diversification Opportunities for Daol Investment and Korea Computer

0.52

Correlation Coefficient

Daol Investment  Korea Computer

Very weak diversification

The 3 months correlation between Daol and Korea is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Daol Investment Securities and Korea Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer and Daol Investment 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 Daol Investment Securities are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer has no effect on the direction of Daol Investment i.e., Daol Investment and Korea Computer go up and down completely randomly.

Pair Corralation between Daol Investment and Korea Computer

Assuming the 90 days trading horizon Daol Investment Securities is expected to under-perform the Korea Computer. But the stock apears to be less risky and, when comparing its historical volatility, Daol Investment Securities is 1.92 times less risky than Korea Computer. The stock trades about -0.23 of its potential returns per unit of risk. The Korea Computer is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  516,000  in Korea Computer on September 4, 2024 and sell it today you would lose (28,500) from holding Korea Computer or give up 5.52% of portfolio value over 90 days.

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

Daol Investment Securities  vs.  Korea Computer

Daol Investment Secu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daol Investment Securities 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.

Korea Computer

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daol Investment and Korea Computer

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

The idea behind Daol Investment Securities and Korea Computer 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.