Correlation Between Cheryong Industrial and Daishin Information

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

By analyzing existing cross correlation between Cheryong Industrial CoLtd and Daishin Information Communications, you can compare the effects of market volatilities on Cheryong Industrial and Daishin Information 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 Cheryong Industrial with a short position of Daishin Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheryong Industrial and Daishin Information.

Diversification Opportunities for Cheryong Industrial and Daishin Information

0.8

Correlation Coefficient

Cheryong Industrial  Daishin Information

Very poor diversification

The 3 months correlation between Cheryong and Daishin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cheryong Industrial CoLtd and Daishin Information Communicat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daishin Information and Cheryong Industrial 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 Cheryong Industrial CoLtd are associated (or correlated) with Daishin Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daishin Information has no effect on the direction of Cheryong Industrial i.e., Cheryong Industrial and Daishin Information go up and down completely randomly.

Pair Corralation between Cheryong Industrial and Daishin Information

Assuming the 90 days trading horizon Cheryong Industrial CoLtd is expected to under-perform the Daishin Information. In addition to that, Cheryong Industrial is 2.74 times more volatile than Daishin Information Communications. It trades about -0.12 of its total potential returns per unit of risk. Daishin Information Communications is currently generating about -0.02 per unit of volatility. If you would invest  86,500  in Daishin Information Communications on September 4, 2024 and sell it today you would lose (1,800) from holding Daishin Information Communications or give up 2.08% of portfolio value over 90 days.

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

Cheryong Industrial CoLtd  vs.  Daishin Information Communicat

Cheryong Industrial CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheryong Industrial CoLtd 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.

Daishin Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cheryong Industrial and Daishin Information

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

The idea behind Cheryong Industrial CoLtd and Daishin Information Communications 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.