Correlation Between Dreamus and Dongwon System

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

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

Diversification Opportunities for Dreamus and Dongwon System

0.16

Correlation Coefficient

Dreamus  Dongwon System

Average diversification

The 3 months correlation between Dreamus and Dongwon is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dreamus Company and Dongwon System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongwon System and Dreamus 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 Dreamus Company are associated (or correlated) with Dongwon System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongwon System has no effect on the direction of Dreamus i.e., Dreamus and Dongwon System go up and down completely randomly.

Pair Corralation between Dreamus and Dongwon System

Assuming the 90 days trading horizon Dreamus Company is expected to under-perform the Dongwon System. In addition to that, Dreamus is 1.57 times more volatile than Dongwon System. It trades about -0.03 of its total potential returns per unit of risk. Dongwon System is currently generating about 0.08 per unit of volatility. If you would invest  4,190,000  in Dongwon System on August 30, 2024 and sell it today you would earn a total of  550,000  from holding Dongwon System or generate 13.13% return on investment over 90 days.

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

Dreamus Company  vs.  Dongwon System

Dreamus Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dreamus Company 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.

Dongwon System

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwon System are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwon System sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dreamus and Dongwon System

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

The idea behind Dreamus Company and Dongwon System 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.