Correlation Between Daejoo Electronic and BH

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

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

Diversification Opportunities for Daejoo Electronic and BH

0.44

Correlation Coefficient

Daejoo Electronic  BH

Very weak diversification

The 3 months correlation between Daejoo and BH is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and BH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Co and Daejoo Electronic 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 Daejoo Electronic Materials are associated (or correlated) with BH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Co has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and BH go up and down completely randomly.

Pair Corralation between Daejoo Electronic and BH

Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to generate 1.14 times more return on investment than BH. However, Daejoo Electronic is 1.14 times more volatile than BH Co. It trades about -0.12 of its potential returns per unit of risk. BH Co is currently generating about -0.17 per unit of risk. If you would invest  11,470,000  in Daejoo Electronic Materials on September 1, 2024 and sell it today you would lose (3,160,000) from holding Daejoo Electronic Materials or give up 27.55% of portfolio value over 90 days.

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

Daejoo Electronic Materials  vs.  BH Co

Daejoo Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daejoo Electronic Materials 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

BH Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BH 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daejoo Electronic and BH

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

The idea behind Daejoo Electronic Materials and BH 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.