Correlation Between Jeju Bank and Duksan Hi

Can any of the company-specific risk be diversified away by investing in both Jeju Bank and Duksan Hi 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 Jeju Bank and Duksan Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jeju Bank and Duksan Hi Metal, you can compare the effects of market volatilities on Jeju Bank and Duksan Hi 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 Jeju Bank with a short position of Duksan Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jeju Bank and Duksan Hi.

Diversification Opportunities for Jeju Bank and Duksan Hi

0.7

Correlation Coefficient

Jeju Bank  Duksan Hi

Poor diversification

The 3 months correlation between Jeju and Duksan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Jeju Bank and Duksan Hi Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duksan Hi Metal and Jeju Bank 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 Jeju Bank are associated (or correlated) with Duksan Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duksan Hi Metal has no effect on the direction of Jeju Bank i.e., Jeju Bank and Duksan Hi go up and down completely randomly.

Pair Corralation between Jeju Bank and Duksan Hi

Assuming the 90 days trading horizon Jeju Bank is expected to generate 2.35 times less return on investment than Duksan Hi. In addition to that, Jeju Bank is 1.24 times more volatile than Duksan Hi Metal. It trades about 0.06 of its total potential returns per unit of risk. Duksan Hi Metal is currently generating about 0.18 per unit of volatility. If you would invest  379,000  in Duksan Hi Metal on October 27, 2024 and sell it today you would earn a total of  24,500  from holding Duksan Hi Metal or generate 6.46% return on investment over 90 days.

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

Jeju Bank  vs.  Duksan Hi Metal

Jeju Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Duksan Hi Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duksan Hi Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Jeju Bank and Duksan Hi

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

The idea behind Jeju Bank and Duksan Hi Metal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.