Correlation Between DB Financial and Bookook Steel

Can any of the company-specific risk be diversified away by investing in both DB Financial and Bookook 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 DB Financial and Bookook Steel 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 Bookook Steel, you can compare the effects of market volatilities on DB Financial and Bookook 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 DB Financial with a short position of Bookook Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of DB Financial and Bookook Steel.

Diversification Opportunities for DB Financial and Bookook Steel

0.3

Correlation Coefficient

DB Financial  Bookook Steel

Weak diversification

The 3 months correlation between 016610 and Bookook is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding DB Financial Investment and Bookook Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bookook Steel 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 Bookook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bookook Steel has no effect on the direction of DB Financial i.e., DB Financial and Bookook Steel go up and down completely randomly.

Pair Corralation between DB Financial and Bookook Steel

Assuming the 90 days trading horizon DB Financial Investment is expected to under-perform the Bookook Steel. But the stock apears to be less risky and, when comparing its historical volatility, DB Financial Investment is 1.33 times less risky than Bookook Steel. The stock trades about -0.14 of its potential returns per unit of risk. The Bookook Steel is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  249,000  in Bookook Steel on September 1, 2024 and sell it today you would lose (11,000) from holding Bookook Steel or give up 4.42% of portfolio value over 90 days.

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

DB Financial Investment  vs.  Bookook Steel

DB Financial Investment

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DB Financial Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DB Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Bookook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bookook Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bookook Steel 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 Bookook Steel

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

The idea behind DB Financial Investment and Bookook Steel 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.