Correlation Between Dongkuk Steel and Dongbu Steel
Can any of the company-specific risk be diversified away by investing in both Dongkuk Steel and Dongbu 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 Dongkuk Steel and Dongbu Steel 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 Dongbu Steel Co, you can compare the effects of market volatilities on Dongkuk Steel and Dongbu 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 Dongkuk Steel with a short position of Dongbu Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Steel and Dongbu Steel.
Diversification Opportunities for Dongkuk Steel and Dongbu Steel
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dongkuk and Dongbu is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and Dongbu Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongbu Steel 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 Dongbu Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongbu Steel has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and Dongbu Steel go up and down completely randomly.
Pair Corralation between Dongkuk Steel and Dongbu Steel
Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to under-perform the Dongbu Steel. But the stock apears to be less risky and, when comparing its historical volatility, Dongkuk Steel Mill is 2.11 times less risky than Dongbu Steel. The stock trades about -0.11 of its potential returns per unit of risk. The Dongbu Steel Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 579,000 in Dongbu Steel Co on September 6, 2024 and sell it today you would earn a total of 52,000 from holding Dongbu Steel Co or generate 8.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Dongkuk Steel Mill vs. Dongbu Steel Co
Performance |
Timeline |
Dongkuk Steel Mill |
Dongbu Steel |
Dongkuk Steel and Dongbu Steel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dongkuk Steel and Dongbu Steel
The main advantage of trading using opposite Dongkuk Steel and Dongbu Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongkuk Steel position performs unexpectedly, Dongbu 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 Dongbu Steel will offset losses from the drop in Dongbu Steel's long position.Dongkuk Steel vs. Barunson Entertainment Arts | Dongkuk Steel vs. TJ media Co | Dongkuk Steel vs. Alton Sports CoLtd | Dongkuk Steel vs. PlayD Co |
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Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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