Correlation Between Transport and Damsan JSC

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

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

Diversification Opportunities for Transport and Damsan JSC

0.68

Correlation Coefficient

Transport  Damsan JSC

Poor diversification

The 3 months correlation between Transport and Damsan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and Damsan JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Damsan JSC and Transport 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 Transport and Industry are associated (or correlated) with Damsan JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Damsan JSC has no effect on the direction of Transport i.e., Transport and Damsan JSC go up and down completely randomly.

Pair Corralation between Transport and Damsan JSC

Assuming the 90 days trading horizon Transport and Industry is expected to under-perform the Damsan JSC. In addition to that, Transport is 1.16 times more volatile than Damsan JSC. It trades about -0.2 of its total potential returns per unit of risk. Damsan JSC is currently generating about -0.08 per unit of volatility. If you would invest  988,000  in Damsan JSC on September 14, 2024 and sell it today you would lose (85,000) from holding Damsan JSC or give up 8.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Transport and Industry  vs.  Damsan JSC

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Damsan JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Damsan JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Transport and Damsan JSC

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

The idea behind Transport and Industry and Damsan JSC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.