Correlation Between Dongwha Enterprise and POSCO Holdings

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

By analyzing existing cross correlation between Dongwha Enterprise CoLtd and POSCO Holdings, you can compare the effects of market volatilities on Dongwha Enterprise and POSCO Holdings 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 Dongwha Enterprise with a short position of POSCO Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongwha Enterprise and POSCO Holdings.

Diversification Opportunities for Dongwha Enterprise and POSCO Holdings

0.5

Correlation Coefficient

Dongwha Enterprise  POSCO Holdings

Very weak diversification

The 3 months correlation between Dongwha and POSCO is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dongwha Enterprise CoLtd and POSCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Holdings and Dongwha Enterprise 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 Dongwha Enterprise CoLtd are associated (or correlated) with POSCO Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Holdings has no effect on the direction of Dongwha Enterprise i.e., Dongwha Enterprise and POSCO Holdings go up and down completely randomly.

Pair Corralation between Dongwha Enterprise and POSCO Holdings

Assuming the 90 days trading horizon Dongwha Enterprise is expected to generate 1.08 times less return on investment than POSCO Holdings. In addition to that, Dongwha Enterprise is 1.91 times more volatile than POSCO Holdings. It trades about 0.07 of its total potential returns per unit of risk. POSCO Holdings is currently generating about 0.15 per unit of volatility. If you would invest  25,868,600  in POSCO Holdings on December 24, 2024 and sell it today you would earn a total of  6,731,400  from holding POSCO Holdings or generate 26.02% return on investment over 90 days.

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

Dongwha Enterprise CoLtd  vs.  POSCO Holdings

Dongwha Enterprise CoLtd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dongwha Enterprise CoLtd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongwha Enterprise sustained solid returns over the last few months and may actually be approaching a breakup point.

POSCO Holdings

Risk-Adjusted Performance

Good

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

Pair Trading with Dongwha Enterprise and POSCO Holdings

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

The idea behind Dongwha Enterprise CoLtd and POSCO Holdings 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.