Correlation Between Dongkuk Steel and OCI Co

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

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

Diversification Opportunities for Dongkuk Steel and OCI Co

0.86

Correlation Coefficient

Dongkuk Steel  OCI Co

Very poor diversification

The 3 months correlation between Dongkuk and OCI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and OCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OCI Co and Dongkuk Steel 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 Dongkuk Steel Mill are associated (or correlated) with OCI Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OCI Co has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and OCI Co go up and down completely randomly.

Pair Corralation between Dongkuk Steel and OCI Co

Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to generate 0.94 times more return on investment than OCI Co. However, Dongkuk Steel Mill is 1.06 times less risky than OCI Co. It trades about -0.01 of its potential returns per unit of risk. OCI Co is currently generating about -0.08 per unit of risk. If you would invest  810,877  in Dongkuk Steel Mill on September 17, 2024 and sell it today you would lose (60,877) from holding Dongkuk Steel Mill or give up 7.51% of portfolio value over 90 days.

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

Dongkuk Steel Mill  vs.  OCI Co

Dongkuk Steel Mill

Risk-Adjusted Performance

0 of 100

Very Weak

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

OCI Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dongkuk Steel and OCI Co

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

The idea behind Dongkuk Steel Mill and OCI 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.