Correlation Between Dongwoo Farm and INFINITT Healthcare

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

By analyzing existing cross correlation between Dongwoo Farm To and INFINITT Healthcare Co, you can compare the effects of market volatilities on Dongwoo Farm and INFINITT Healthcare 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 Dongwoo Farm with a short position of INFINITT Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwoo Farm and INFINITT Healthcare.

Diversification Opportunities for Dongwoo Farm and INFINITT Healthcare

0.07

Correlation Coefficient

Dongwoo Farm  INFINITT Healthcare

Significant diversification

The 3 months correlation between Dongwoo and INFINITT is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dongwoo Farm To and INFINITT Healthcare Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFINITT Healthcare and Dongwoo Farm 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 Dongwoo Farm To are associated (or correlated) with INFINITT Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFINITT Healthcare has no effect on the direction of Dongwoo Farm i.e., Dongwoo Farm and INFINITT Healthcare go up and down completely randomly.

Pair Corralation between Dongwoo Farm and INFINITT Healthcare

Assuming the 90 days trading horizon Dongwoo Farm To is expected to under-perform the INFINITT Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Dongwoo Farm To is 1.62 times less risky than INFINITT Healthcare. The stock trades about -0.03 of its potential returns per unit of risk. The INFINITT Healthcare Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  420,500  in INFINITT Healthcare Co on October 1, 2024 and sell it today you would lose (10,000) from holding INFINITT Healthcare Co or give up 2.38% of portfolio value over 90 days.

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

Dongwoo Farm To  vs.  INFINITT Healthcare Co

Dongwoo Farm To

Risk-Adjusted Performance

0 of 100

Very Weak

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

INFINITT Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dongwoo Farm and INFINITT Healthcare

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

The idea behind Dongwoo Farm To and INFINITT Healthcare 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.