Correlation Between TES Co and Dongsin Engineering

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

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

Diversification Opportunities for TES Co and Dongsin Engineering

-0.37

Correlation Coefficient

TES Co  Dongsin Engineering

Very good diversification

The 3 months correlation between TES and Dongsin is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding TES Co and Dongsin Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongsin Engineering and TES Co 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 TES Co are associated (or correlated) with Dongsin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongsin Engineering has no effect on the direction of TES Co i.e., TES Co and Dongsin Engineering go up and down completely randomly.

Pair Corralation between TES Co and Dongsin Engineering

Assuming the 90 days trading horizon TES Co is expected to under-perform the Dongsin Engineering. But the stock apears to be less risky and, when comparing its historical volatility, TES Co is 3.87 times less risky than Dongsin Engineering. The stock trades about -0.03 of its potential returns per unit of risk. The Dongsin Engineering Construction is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,979,000  in Dongsin Engineering Construction on September 22, 2024 and sell it today you would earn a total of  2,521,000  from holding Dongsin Engineering Construction or generate 127.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

TES Co  vs.  Dongsin Engineering Constructi

TES Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dongsin Engineering

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongsin Engineering Construction are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongsin Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TES Co and Dongsin Engineering

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

The idea behind TES Co and Dongsin Engineering Construction 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.