Correlation Between DeviceENGCOLtd and Cafe24 Corp

Can any of the company-specific risk be diversified away by investing in both DeviceENGCOLtd and Cafe24 Corp 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 DeviceENGCOLtd and Cafe24 Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DeviceENGCOLtd and Cafe24 Corp, you can compare the effects of market volatilities on DeviceENGCOLtd and Cafe24 Corp 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 DeviceENGCOLtd with a short position of Cafe24 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DeviceENGCOLtd and Cafe24 Corp.

Diversification Opportunities for DeviceENGCOLtd and Cafe24 Corp

-0.31

Correlation Coefficient

DeviceENGCOLtd  Cafe24 Corp

Very good diversification

The 3 months correlation between DeviceENGCOLtd and Cafe24 is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding DeviceENGCOLtd and Cafe24 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cafe24 Corp and DeviceENGCOLtd 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 DeviceENGCOLtd are associated (or correlated) with Cafe24 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cafe24 Corp has no effect on the direction of DeviceENGCOLtd i.e., DeviceENGCOLtd and Cafe24 Corp go up and down completely randomly.

Pair Corralation between DeviceENGCOLtd and Cafe24 Corp

Assuming the 90 days trading horizon DeviceENGCOLtd is expected to under-perform the Cafe24 Corp. But the stock apears to be less risky and, when comparing its historical volatility, DeviceENGCOLtd is 1.5 times less risky than Cafe24 Corp. The stock trades about -0.01 of its potential returns per unit of risk. The Cafe24 Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,015,000  in Cafe24 Corp on September 15, 2024 and sell it today you would earn a total of  735,000  from holding Cafe24 Corp or generate 24.38% return on investment over 90 days.

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

DeviceENGCOLtd  vs.  Cafe24 Corp

DeviceENGCOLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DeviceENGCOLtd 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.

Cafe24 Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cafe24 Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cafe24 Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DeviceENGCOLtd and Cafe24 Corp

The main advantage of trading using opposite DeviceENGCOLtd and Cafe24 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DeviceENGCOLtd position performs unexpectedly, Cafe24 Corp 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 Cafe24 Corp will offset losses from the drop in Cafe24 Corp's long position.

The idea behind DeviceENGCOLtd and Cafe24 Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.