Correlation Between DB Financial and Korea Refractories

Can any of the company-specific risk be diversified away by investing in both DB Financial and Korea Refractories 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 DB Financial and Korea Refractories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DB Financial Investment and Korea Refractories Co, you can compare the effects of market volatilities on DB Financial and Korea Refractories 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 DB Financial with a short position of Korea Refractories. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and Korea Refractories.

Diversification Opportunities for DB Financial and Korea Refractories

0.58

Correlation Coefficient

DB Financial  Korea Refractories

Very weak diversification

The 3 months correlation between 016610 and Korea is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Korea Refractories Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Refractories and DB Financial 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 DB Financial Investment are associated (or correlated) with Korea Refractories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Refractories has no effect on the direction of DB Financial i.e., DB Financial and Korea Refractories go up and down completely randomly.

Pair Corralation between DB Financial and Korea Refractories

Assuming the 90 days trading horizon DB Financial Investment is expected to under-perform the Korea Refractories. In addition to that, DB Financial is 1.02 times more volatile than Korea Refractories Co. It trades about -0.03 of its total potential returns per unit of risk. Korea Refractories Co is currently generating about -0.03 per unit of volatility. If you would invest  223,294  in Korea Refractories Co on October 7, 2024 and sell it today you would lose (6,294) from holding Korea Refractories Co or give up 2.82% of portfolio value over 90 days.

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

DB Financial Investment  vs.  Korea Refractories Co

DB Financial Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Financial Investment 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.

Korea Refractories

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with DB Financial and Korea Refractories

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

The idea behind DB Financial Investment and Korea Refractories 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.