Correlation Between ENERGYMACHINERY KOREA and Dream Security

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

By analyzing existing cross correlation between ENERGYMACHINERY KOREA CoLtd and Dream Security co, you can compare the effects of market volatilities on ENERGYMACHINERY KOREA and Dream Security 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 ENERGYMACHINERY KOREA with a short position of Dream Security. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENERGYMACHINERY KOREA and Dream Security.

Diversification Opportunities for ENERGYMACHINERY KOREA and Dream Security

0.01

Correlation Coefficient

ENERGYMACHINERY KOREA  Dream Security

Significant diversification

The 3 months correlation between ENERGYMACHINERY and Dream is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ENERGYMACHINERY KOREA CoLtd and Dream Security co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Security co and ENERGYMACHINERY KOREA 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 ENERGYMACHINERY KOREA CoLtd are associated (or correlated) with Dream Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Security co has no effect on the direction of ENERGYMACHINERY KOREA i.e., ENERGYMACHINERY KOREA and Dream Security go up and down completely randomly.

Pair Corralation between ENERGYMACHINERY KOREA and Dream Security

Assuming the 90 days trading horizon ENERGYMACHINERY KOREA CoLtd is expected to under-perform the Dream Security. But the stock apears to be less risky and, when comparing its historical volatility, ENERGYMACHINERY KOREA CoLtd is 1.07 times less risky than Dream Security. The stock trades about -0.01 of its potential returns per unit of risk. The Dream Security co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  285,500  in Dream Security co on September 28, 2024 and sell it today you would earn a total of  76,500  from holding Dream Security co or generate 26.8% return on investment over 90 days.

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

ENERGYMACHINERY KOREA CoLtd  vs.  Dream Security co

ENERGYMACHINERY KOREA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENERGYMACHINERY KOREA CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ENERGYMACHINERY KOREA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dream Security co

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with ENERGYMACHINERY KOREA and Dream Security

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

The idea behind ENERGYMACHINERY KOREA CoLtd and Dream Security 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 Transaction History module to view history of all your transactions and understand their impact on performance.