Correlation Between Dream Security and Jeju Beer

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

By analyzing existing cross correlation between Dream Security co and Jeju Beer Co, you can compare the effects of market volatilities on Dream Security and Jeju Beer 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 Dream Security with a short position of Jeju Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dream Security and Jeju Beer.

Diversification Opportunities for Dream Security and Jeju Beer

-0.53

Correlation Coefficient

Dream Security  Jeju Beer

Excellent diversification

The 3 months correlation between Dream and Jeju is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dream Security co and Jeju Beer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Beer and Dream Security 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 Dream Security co are associated (or correlated) with Jeju Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Beer has no effect on the direction of Dream Security i.e., Dream Security and Jeju Beer go up and down completely randomly.

Pair Corralation between Dream Security and Jeju Beer

Assuming the 90 days trading horizon Dream Security co is expected to generate 0.58 times more return on investment than Jeju Beer. However, Dream Security co is 1.73 times less risky than Jeju Beer. It trades about 0.1 of its potential returns per unit of risk. Jeju Beer Co is currently generating about 0.04 per unit of risk. If you would invest  296,000  in Dream Security co on August 31, 2024 and sell it today you would earn a total of  39,000  from holding Dream Security co or generate 13.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Dream Security co  vs.  Jeju Beer Co

Dream Security co

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dream Security co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dream Security sustained solid returns over the last few months and may actually be approaching a breakup point.

Jeju Beer

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Beer may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Dream Security and Jeju Beer

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

The idea behind Dream Security co and Jeju Beer Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.