Correlation Between Dongwon Metal and Duksan Hi

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

Diversification Opportunities for Dongwon Metal and Duksan Hi

0.62

Correlation Coefficient

Dongwon Metal  Duksan Hi

Poor diversification

The 3 months correlation between Dongwon and Duksan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dongwon Metal Co 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 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 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 Metal i.e., Dongwon Metal and Duksan Hi go up and down completely randomly.

Pair Corralation between Dongwon Metal and Duksan Hi

Assuming the 90 days trading horizon Dongwon Metal Co is expected to generate 3.15 times more return on investment than Duksan Hi. However, Dongwon Metal is 3.15 times more volatile than Duksan Hi Metal. It trades about 0.16 of its potential returns per unit of risk. Duksan Hi Metal is currently generating about 0.1 per unit of risk. If you would invest  107,700  in Dongwon Metal Co on December 4, 2024 and sell it today you would earn a total of  92,800  from holding Dongwon Metal Co or generate 86.17% 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.  Duksan Hi Metal

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.

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 7 (%) 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 Metal and Duksan Hi

The main advantage of trading using opposite Dongwon Metal and Duksan Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dongwon Metal 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 Metal Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.