Correlation Between IM CoLtd and Daejoo Electronic

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

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

Diversification Opportunities for IM CoLtd and Daejoo Electronic

0.83

Correlation Coefficient

IM CoLtd  Daejoo Electronic

Very poor diversification

The 3 months correlation between 101390 and Daejoo is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding IM CoLtd and Daejoo Electronic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daejoo Electronic and IM CoLtd 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 IM CoLtd are associated (or correlated) with Daejoo Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daejoo Electronic has no effect on the direction of IM CoLtd i.e., IM CoLtd and Daejoo Electronic go up and down completely randomly.

Pair Corralation between IM CoLtd and Daejoo Electronic

Assuming the 90 days trading horizon IM CoLtd is expected to generate 0.96 times more return on investment than Daejoo Electronic. However, IM CoLtd is 1.04 times less risky than Daejoo Electronic. It trades about -0.28 of its potential returns per unit of risk. Daejoo Electronic Materials is currently generating about -0.33 per unit of risk. If you would invest  329,000  in IM CoLtd on September 1, 2024 and sell it today you would lose (64,500) from holding IM CoLtd or give up 19.6% of portfolio value over 90 days.

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

IM CoLtd  vs.  Daejoo Electronic Materials

IM CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IM CoLtd 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.

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.

Pair Trading with IM CoLtd and Daejoo Electronic

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

The idea behind IM CoLtd and Daejoo Electronic Materials 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.