Correlation Between Tae Kyung and Dongil Metal

Can any of the company-specific risk be diversified away by investing in both Tae Kyung and Dongil Metal 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 Tae Kyung and Dongil Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tae Kyung Chemical and Dongil Metal Co, you can compare the effects of market volatilities on Tae Kyung and Dongil Metal 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 Tae Kyung with a short position of Dongil Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tae Kyung and Dongil Metal.

Diversification Opportunities for Tae Kyung and Dongil Metal

0.27

Correlation Coefficient

Tae Kyung  Dongil Metal

Modest diversification

The 3 months correlation between Tae and Dongil is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tae Kyung Chemical and Dongil Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongil Metal and Tae Kyung 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 Tae Kyung Chemical are associated (or correlated) with Dongil Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongil Metal has no effect on the direction of Tae Kyung i.e., Tae Kyung and Dongil Metal go up and down completely randomly.

Pair Corralation between Tae Kyung and Dongil Metal

Assuming the 90 days trading horizon Tae Kyung is expected to generate 8.72 times less return on investment than Dongil Metal. But when comparing it to its historical volatility, Tae Kyung Chemical is 1.24 times less risky than Dongil Metal. It trades about 0.06 of its potential returns per unit of risk. Dongil Metal Co is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  763,000  in Dongil Metal Co on October 26, 2024 and sell it today you would earn a total of  140,000  from holding Dongil Metal Co or generate 18.35% return on investment over 90 days.

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

Tae Kyung Chemical  vs.  Dongil Metal Co

Tae Kyung Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tae Kyung Chemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tae Kyung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dongil Metal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dongil Metal Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongil Metal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tae Kyung and Dongil Metal

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

The idea behind Tae Kyung Chemical and Dongil Metal 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.