Correlation Between Dongil Steel and Finebesteel

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

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

Diversification Opportunities for Dongil Steel and Finebesteel

0.92

Correlation Coefficient

Dongil Steel  Finebesteel

Almost no diversification

The 3 months correlation between Dongil and Finebesteel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Dongil Steel Co and Finebesteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finebesteel and Dongil Steel 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 Dongil Steel Co are associated (or correlated) with Finebesteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finebesteel has no effect on the direction of Dongil Steel i.e., Dongil Steel and Finebesteel go up and down completely randomly.

Pair Corralation between Dongil Steel and Finebesteel

Assuming the 90 days trading horizon Dongil Steel is expected to generate 2.62 times less return on investment than Finebesteel. But when comparing it to its historical volatility, Dongil Steel Co is 1.01 times less risky than Finebesteel. It trades about 0.03 of its potential returns per unit of risk. Finebesteel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  104,700  in Finebesteel on November 29, 2024 and sell it today you would earn a total of  12,900  from holding Finebesteel or generate 12.32% return on investment over 90 days.

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

Dongil Steel Co  vs.  Finebesteel

Dongil Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dongil Steel Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongil Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Finebesteel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dongil Steel and Finebesteel

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

The idea behind Dongil Steel Co and Finebesteel 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .