Correlation Between SK Hynix and DONGKUK STEEL

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

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

Diversification Opportunities for SK Hynix and DONGKUK STEEL

0.28

Correlation Coefficient

SK Hynix  DONGKUK STEEL

Modest diversification

The 3 months correlation between 000660 and DONGKUK is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SK Hynix and DONGKUK STEEL MILL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONGKUK STEEL MILL and SK Hynix 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 SK Hynix are associated (or correlated) with DONGKUK STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONGKUK STEEL MILL has no effect on the direction of SK Hynix i.e., SK Hynix and DONGKUK STEEL go up and down completely randomly.

Pair Corralation between SK Hynix and DONGKUK STEEL

Assuming the 90 days trading horizon SK Hynix is expected to generate 1.05 times less return on investment than DONGKUK STEEL. In addition to that, SK Hynix is 1.28 times more volatile than DONGKUK STEEL MILL. It trades about 0.09 of its total potential returns per unit of risk. DONGKUK STEEL MILL is currently generating about 0.12 per unit of volatility. If you would invest  774,194  in DONGKUK STEEL MILL on December 30, 2024 and sell it today you would earn a total of  137,806  from holding DONGKUK STEEL MILL or generate 17.8% return on investment over 90 days.

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

SK Hynix  vs.  DONGKUK STEEL MILL

SK Hynix

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SK Hynix are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SK Hynix sustained solid returns over the last few months and may actually be approaching a breakup point.

DONGKUK STEEL MILL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DONGKUK STEEL MILL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DONGKUK STEEL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SK Hynix and DONGKUK STEEL

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

The idea behind SK Hynix and DONGKUK STEEL MILL 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.