Correlation Between Daebo Magnetic and Bokwang Industry

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

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

Diversification Opportunities for Daebo Magnetic and Bokwang Industry

0.87

Correlation Coefficient

Daebo Magnetic  Bokwang Industry

Very poor diversification

The 3 months correlation between Daebo and Bokwang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Daebo Magnetic CoLtd and Bokwang Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bokwang Industry and Daebo Magnetic 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 Daebo Magnetic CoLtd are associated (or correlated) with Bokwang Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bokwang Industry has no effect on the direction of Daebo Magnetic i.e., Daebo Magnetic and Bokwang Industry go up and down completely randomly.

Pair Corralation between Daebo Magnetic and Bokwang Industry

Assuming the 90 days trading horizon Daebo Magnetic CoLtd is expected to under-perform the Bokwang Industry. In addition to that, Daebo Magnetic is 1.66 times more volatile than Bokwang Industry Co. It trades about -0.14 of its total potential returns per unit of risk. Bokwang Industry Co is currently generating about -0.13 per unit of volatility. If you would invest  427,649  in Bokwang Industry Co on September 5, 2024 and sell it today you would lose (66,649) from holding Bokwang Industry Co or give up 15.58% of portfolio value over 90 days.

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

Daebo Magnetic CoLtd  vs.  Bokwang Industry Co

Daebo Magnetic CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daebo Magnetic 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.

Bokwang Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bokwang Industry 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.

Pair Trading with Daebo Magnetic and Bokwang Industry

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

The idea behind Daebo Magnetic CoLtd and Bokwang Industry 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.