Correlation Between Dong A and 577 Investment

Can any of the company-specific risk be diversified away by investing in both Dong A and 577 Investment 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 Dong A and 577 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dong A Hotel and 577 Investment Corp, you can compare the effects of market volatilities on Dong A and 577 Investment 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 Dong A with a short position of 577 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and 577 Investment.

Diversification Opportunities for Dong A and 577 Investment

-0.65

Correlation Coefficient

Dong A  577 Investment

Excellent diversification

The 3 months correlation between Dong and 577 is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Hotel and 577 Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 577 Investment Corp and Dong A 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 Dong A Hotel are associated (or correlated) with 577 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 577 Investment Corp has no effect on the direction of Dong A i.e., Dong A and 577 Investment go up and down completely randomly.

Pair Corralation between Dong A and 577 Investment

Assuming the 90 days trading horizon Dong A Hotel is expected to under-perform the 577 Investment. But the stock apears to be less risky and, when comparing its historical volatility, Dong A Hotel is 1.85 times less risky than 577 Investment. The stock trades about -0.02 of its potential returns per unit of risk. The 577 Investment Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,225,000  in 577 Investment Corp on September 16, 2024 and sell it today you would earn a total of  75,000  from holding 577 Investment Corp or generate 3.37% return on investment over 90 days.

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

Dong A Hotel  vs.  577 Investment Corp

Dong A Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong A Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Dong A is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

577 Investment Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in 577 Investment Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, 577 Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dong A and 577 Investment

The main advantage of trading using opposite Dong A and 577 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A position performs unexpectedly, 577 Investment 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 577 Investment will offset losses from the drop in 577 Investment's long position.

The idea behind Dong A Hotel and 577 Investment 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.