Correlation Between Derkwoo Electronics and Samji Electronics

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

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

Diversification Opportunities for Derkwoo Electronics and Samji Electronics

0.67

Correlation Coefficient

Derkwoo Electronics  Samji Electronics

Poor diversification

The 3 months correlation between Derkwoo and Samji is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Derkwoo Electronics Co and Samji Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samji Electronics and Derkwoo Electronics 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 Derkwoo Electronics Co are associated (or correlated) with Samji Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samji Electronics has no effect on the direction of Derkwoo Electronics i.e., Derkwoo Electronics and Samji Electronics go up and down completely randomly.

Pair Corralation between Derkwoo Electronics and Samji Electronics

Assuming the 90 days trading horizon Derkwoo Electronics Co is expected to under-perform the Samji Electronics. In addition to that, Derkwoo Electronics is 2.88 times more volatile than Samji Electronics Co. It trades about -0.11 of its total potential returns per unit of risk. Samji Electronics Co is currently generating about -0.05 per unit of volatility. If you would invest  865,000  in Samji Electronics Co on September 5, 2024 and sell it today you would lose (19,000) from holding Samji Electronics Co or give up 2.2% of portfolio value over 90 days.

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

Derkwoo Electronics Co  vs.  Samji Electronics Co

Derkwoo Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Derkwoo Electronics Co 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.

Samji Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Derkwoo Electronics and Samji Electronics

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

The idea behind Derkwoo Electronics Co and Samji Electronics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.