Correlation Between Dongbang Transport and Jeil Steel

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

By analyzing existing cross correlation between Dongbang Transport Logistics and Jeil Steel Mfg, you can compare the effects of market volatilities on Dongbang Transport and Jeil 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 Dongbang Transport with a short position of Jeil Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongbang Transport and Jeil Steel.

Diversification Opportunities for Dongbang Transport and Jeil Steel

0.16

Correlation Coefficient

Dongbang Transport  Jeil Steel

Average diversification

The 3 months correlation between Dongbang and Jeil is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dongbang Transport Logistics and Jeil Steel Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeil Steel Mfg and Dongbang Transport 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 Dongbang Transport Logistics are associated (or correlated) with Jeil Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeil Steel Mfg has no effect on the direction of Dongbang Transport i.e., Dongbang Transport and Jeil Steel go up and down completely randomly.

Pair Corralation between Dongbang Transport and Jeil Steel

Assuming the 90 days trading horizon Dongbang Transport is expected to generate 2.65 times less return on investment than Jeil Steel. But when comparing it to its historical volatility, Dongbang Transport Logistics is 1.64 times less risky than Jeil Steel. It trades about 0.03 of its potential returns per unit of risk. Jeil Steel Mfg is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  173,900  in Jeil Steel Mfg on December 24, 2024 and sell it today you would earn a total of  12,100  from holding Jeil Steel Mfg or generate 6.96% return on investment over 90 days.

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

Dongbang Transport Logistics  vs.  Jeil Steel Mfg

Dongbang Transport

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongbang Transport Logistics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongbang Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jeil Steel Mfg

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jeil Steel Mfg are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeil Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dongbang Transport and Jeil Steel

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

The idea behind Dongbang Transport Logistics and Jeil Steel Mfg 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 Transaction History module to view history of all your transactions and understand their impact on performance.