Correlation Between Soulbrain Holdings and DongKook Pharmaceutical

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

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

Diversification Opportunities for Soulbrain Holdings and DongKook Pharmaceutical

0.47

Correlation Coefficient

Soulbrain Holdings  DongKook Pharmaceutical

Very weak diversification

The 3 months correlation between Soulbrain and DongKook is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Soulbrain Holdings Co and DongKook Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DongKook Pharmaceutical and Soulbrain Holdings 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 Soulbrain Holdings Co are associated (or correlated) with DongKook Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DongKook Pharmaceutical has no effect on the direction of Soulbrain Holdings i.e., Soulbrain Holdings and DongKook Pharmaceutical go up and down completely randomly.

Pair Corralation between Soulbrain Holdings and DongKook Pharmaceutical

Assuming the 90 days trading horizon Soulbrain Holdings Co is expected to under-perform the DongKook Pharmaceutical. In addition to that, Soulbrain Holdings is 1.73 times more volatile than DongKook Pharmaceutical Co. It trades about -0.18 of its total potential returns per unit of risk. DongKook Pharmaceutical Co is currently generating about -0.01 per unit of volatility. If you would invest  1,723,000  in DongKook Pharmaceutical Co on September 26, 2024 and sell it today you would lose (52,000) from holding DongKook Pharmaceutical Co or give up 3.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Soulbrain Holdings Co  vs.  DongKook Pharmaceutical Co

Soulbrain Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soulbrain Holdings 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.

DongKook Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Soulbrain Holdings and DongKook Pharmaceutical

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

The idea behind Soulbrain Holdings Co and DongKook Pharmaceutical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.