Correlation Between Pyung Hwa and COWAY

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

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

Diversification Opportunities for Pyung Hwa and COWAY

-0.41

Correlation Coefficient

Pyung Hwa  COWAY

Very good diversification

The 3 months correlation between Pyung and COWAY is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Pyung Hwa Industrial and COWAY Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COWAY and Pyung Hwa 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 Pyung Hwa Industrial are associated (or correlated) with COWAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COWAY has no effect on the direction of Pyung Hwa i.e., Pyung Hwa and COWAY go up and down completely randomly.

Pair Corralation between Pyung Hwa and COWAY

Assuming the 90 days trading horizon Pyung Hwa Industrial is expected to under-perform the COWAY. In addition to that, Pyung Hwa is 1.18 times more volatile than COWAY Co. It trades about -0.01 of its total potential returns per unit of risk. COWAY Co is currently generating about 0.03 per unit of volatility. If you would invest  5,697,936  in COWAY Co on September 14, 2024 and sell it today you would earn a total of  1,282,064  from holding COWAY Co or generate 22.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Pyung Hwa Industrial  vs.  COWAY Co

Pyung Hwa Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pyung Hwa Industrial 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.

COWAY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COWAY Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, COWAY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pyung Hwa and COWAY

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

The idea behind Pyung Hwa Industrial and COWAY 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.