Correlation Between Finebesteel and Dawonsys CoLtd

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

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

Diversification Opportunities for Finebesteel and Dawonsys CoLtd

-0.38

Correlation Coefficient

Finebesteel  Dawonsys CoLtd

Very good diversification

The 3 months correlation between Finebesteel and Dawonsys is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Dawonsys CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dawonsys CoLtd and Finebesteel 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 Finebesteel are associated (or correlated) with Dawonsys CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dawonsys CoLtd has no effect on the direction of Finebesteel i.e., Finebesteel and Dawonsys CoLtd go up and down completely randomly.

Pair Corralation between Finebesteel and Dawonsys CoLtd

Assuming the 90 days trading horizon Finebesteel is expected to generate 1.55 times more return on investment than Dawonsys CoLtd. However, Finebesteel is 1.55 times more volatile than Dawonsys CoLtd. It trades about 0.14 of its potential returns per unit of risk. Dawonsys CoLtd is currently generating about 0.07 per unit of risk. If you would invest  89,500  in Finebesteel on August 19, 2024 and sell it today you would earn a total of  11,500  from holding Finebesteel or generate 12.85% return on investment over 90 days.

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

Finebesteel  vs.  Dawonsys CoLtd

Finebesteel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Finebesteel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dawonsys CoLtd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dawonsys CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dawonsys CoLtd may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Finebesteel and Dawonsys CoLtd

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

The idea behind Finebesteel and Dawonsys CoLtd 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.