Correlation Between Dongkuk Steel and Guyoung Technology

Can any of the company-specific risk be diversified away by investing in both Dongkuk Steel and Guyoung Technology 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 Guyoung Technology 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 Guyoung Technology Co, you can compare the effects of market volatilities on Dongkuk Steel and Guyoung Technology 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 Guyoung Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongkuk Steel and Guyoung Technology.

Diversification Opportunities for Dongkuk Steel and Guyoung Technology

-0.2

Correlation Coefficient

Dongkuk Steel  Guyoung Technology

Good diversification

The 3 months correlation between Dongkuk and Guyoung is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dongkuk Steel Mill and Guyoung Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guyoung Technology 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 Guyoung Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guyoung Technology has no effect on the direction of Dongkuk Steel i.e., Dongkuk Steel and Guyoung Technology go up and down completely randomly.

Pair Corralation between Dongkuk Steel and Guyoung Technology

Assuming the 90 days trading horizon Dongkuk Steel Mill is expected to generate 0.59 times more return on investment than Guyoung Technology. However, Dongkuk Steel Mill is 1.69 times less risky than Guyoung Technology. It trades about 0.25 of its potential returns per unit of risk. Guyoung Technology Co is currently generating about 0.08 per unit of risk. If you would invest  705,000  in Dongkuk Steel Mill on December 4, 2024 and sell it today you would earn a total of  47,000  from holding Dongkuk Steel Mill or generate 6.67% return on investment over 90 days.

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

Dongkuk Steel Mill  vs.  Guyoung Technology Co

Dongkuk Steel Mill

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dongkuk Steel Mill are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Guyoung Technology

Risk-Adjusted Performance

OK

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

Pair Trading with Dongkuk Steel and Guyoung Technology

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

The idea behind Dongkuk Steel Mill and Guyoung Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.