Correlation Between N Citron and Daekyung Machinery

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

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

Diversification Opportunities for N Citron and Daekyung Machinery

-0.27

Correlation Coefficient

N Citron  Daekyung Machinery

Very good diversification

The 3 months correlation between 101400 and Daekyung is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding N Citron and Daekyung Machinery Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daekyung Machinery and N Citron 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 N Citron are associated (or correlated) with Daekyung Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daekyung Machinery has no effect on the direction of N Citron i.e., N Citron and Daekyung Machinery go up and down completely randomly.

Pair Corralation between N Citron and Daekyung Machinery

Assuming the 90 days trading horizon N Citron is expected to under-perform the Daekyung Machinery. But the stock apears to be less risky and, when comparing its historical volatility, N Citron is 2.03 times less risky than Daekyung Machinery. The stock trades about -0.18 of its potential returns per unit of risk. The Daekyung Machinery Engineering is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  43,700  in Daekyung Machinery Engineering on September 5, 2024 and sell it today you would earn a total of  7,800  from holding Daekyung Machinery Engineering or generate 17.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.53%
Values	Daily Returns

N Citron  vs.  Daekyung Machinery Engineering

N Citron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days N Citron 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daekyung Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daekyung Machinery Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daekyung Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with N Citron and Daekyung Machinery

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

The idea behind N Citron and Daekyung Machinery Engineering 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.