Correlation Between Dongwon System and Duksan Hi

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

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

Diversification Opportunities for Dongwon System and Duksan Hi

0.05

Correlation Coefficient

Dongwon System  Duksan Hi

Significant diversification

The 3 months correlation between Dongwon and Duksan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon System 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 Dongwon System 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 Dongwon System 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 Dongwon System i.e., Dongwon System and Duksan Hi go up and down completely randomly.

Pair Corralation between Dongwon System and Duksan Hi

Assuming the 90 days trading horizon Dongwon System is expected to under-perform the Duksan Hi. But the stock apears to be less risky and, when comparing its historical volatility, Dongwon System is 1.18 times less risky than Duksan Hi. The stock trades about -0.07 of its potential returns per unit of risk. The Duksan Hi Metal is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  379,000  in Duksan Hi Metal on December 27, 2024 and sell it today you would earn a total of  60,000  from holding Duksan Hi Metal or generate 15.83% return on investment over 90 days.

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

Dongwon System  vs.  Duksan Hi Metal

Dongwon System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dongwon System 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.

Duksan Hi Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duksan Hi Metal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Duksan Hi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongwon System and Duksan Hi

The main advantage of trading using opposite Dongwon System and Duksan Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon System 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 Dongwon System 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.