Correlation Between Dongwon Metal and Kukil Metal

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

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

Diversification Opportunities for Dongwon Metal and Kukil Metal

0.74

Correlation Coefficient

Dongwon Metal  Kukil Metal

Poor diversification

The 3 months correlation between Dongwon and Kukil is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon Metal Co and Kukil Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukil Metal and Dongwon Metal 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 Metal Co are associated (or correlated) with Kukil Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukil Metal has no effect on the direction of Dongwon Metal i.e., Dongwon Metal and Kukil Metal go up and down completely randomly.

Pair Corralation between Dongwon Metal and Kukil Metal

Assuming the 90 days trading horizon Dongwon Metal Co is expected to generate 5.35 times more return on investment than Kukil Metal. However, Dongwon Metal is 5.35 times more volatile than Kukil Metal Co. It trades about 0.16 of its potential returns per unit of risk. Kukil Metal Co is currently generating about 0.03 per unit of risk. If you would invest  108,500  in Dongwon Metal Co on December 1, 2024 and sell it today you would earn a total of  92,000  from holding Dongwon Metal Co or generate 84.79% return on investment over 90 days.

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

Dongwon Metal Co  vs.  Kukil Metal Co

Dongwon Metal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwon Metal Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwon Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Kukil Metal

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kukil Metal Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kukil Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongwon Metal and Kukil Metal

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

The idea behind Dongwon Metal Co and Kukil 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.