Correlation Between Daishin Balance and Korea Computer

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

By analyzing existing cross correlation between Daishin Balance 1 and Korea Computer, you can compare the effects of market volatilities on Daishin Balance and Korea Computer 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 Daishin Balance with a short position of Korea Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daishin Balance and Korea Computer.

Diversification Opportunities for Daishin Balance and Korea Computer

0.43

Correlation Coefficient

Daishin Balance  Korea Computer

Very weak diversification

The 3 months correlation between Daishin and Korea is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Daishin Balance 1 and Korea Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Computer and Daishin Balance 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 Daishin Balance 1 are associated (or correlated) with Korea Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Computer has no effect on the direction of Daishin Balance i.e., Daishin Balance and Korea Computer go up and down completely randomly.

Pair Corralation between Daishin Balance and Korea Computer

Assuming the 90 days trading horizon Daishin Balance 1 is expected to under-perform the Korea Computer. But the stock apears to be less risky and, when comparing its historical volatility, Daishin Balance 1 is 1.14 times less risky than Korea Computer. The stock trades about -0.07 of its potential returns per unit of risk. The Korea Computer is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  560,000  in Korea Computer on September 26, 2024 and sell it today you would lose (28,000) from holding Korea Computer or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Daishin Balance 1  vs.  Korea Computer

Daishin Balance 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daishin Balance 1 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.

Korea Computer

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daishin Balance and Korea Computer

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

The idea behind Daishin Balance 1 and Korea Computer 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.