Correlation Between Wave Electronics and Dongil Metal

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

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

Diversification Opportunities for Wave Electronics and Dongil Metal

-0.22

Correlation Coefficient

Wave Electronics  Dongil Metal

Very good diversification

The 3 months correlation between Wave and Dongil is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Wave Electronics Co and Dongil Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongil Metal and Wave 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 Wave Electronics Co are associated (or correlated) with Dongil Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongil Metal has no effect on the direction of Wave Electronics i.e., Wave Electronics and Dongil Metal go up and down completely randomly.

Pair Corralation between Wave Electronics and Dongil Metal

Assuming the 90 days trading horizon Wave Electronics Co is expected to generate 2.98 times more return on investment than Dongil Metal. However, Wave Electronics is 2.98 times more volatile than Dongil Metal Co. It trades about 0.42 of its potential returns per unit of risk. Dongil Metal Co is currently generating about 0.12 per unit of risk. If you would invest  504,000  in Wave Electronics Co on February 2, 2024 and sell it today you would earn a total of  63,000  from holding Wave Electronics Co or generate 12.5% return on investment over 90 days.

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

Wave Electronics Co  vs.  Dongil Metal Co

Wave Electronics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Electronics Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wave Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Wave Electronics and Dongil Metal

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

The idea behind Wave Electronics Co and Dongil Metal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.