Correlation Between Dongsin Engineering and Kukdong Oil

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

By analyzing existing cross correlation between Dongsin Engineering Construction and Kukdong Oil Chemicals, you can compare the effects of market volatilities on Dongsin Engineering and Kukdong Oil 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 Dongsin Engineering with a short position of Kukdong Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dongsin Engineering and Kukdong Oil.

Diversification Opportunities for Dongsin Engineering and Kukdong Oil

-0.08

Correlation Coefficient

Dongsin Engineering  Kukdong Oil

Good diversification

The 3 months correlation between Dongsin and Kukdong is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dongsin Engineering Constructi and Kukdong Oil Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kukdong Oil Chemicals and Dongsin Engineering 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 Dongsin Engineering Construction are associated (or correlated) with Kukdong Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kukdong Oil Chemicals has no effect on the direction of Dongsin Engineering i.e., Dongsin Engineering and Kukdong Oil go up and down completely randomly.

Pair Corralation between Dongsin Engineering and Kukdong Oil

Assuming the 90 days trading horizon Dongsin Engineering Construction is expected to generate 2.1 times more return on investment than Kukdong Oil. However, Dongsin Engineering is 2.1 times more volatile than Kukdong Oil Chemicals. It trades about 0.06 of its potential returns per unit of risk. Kukdong Oil Chemicals is currently generating about 0.02 per unit of risk. If you would invest  1,458,072  in Dongsin Engineering Construction on October 25, 2024 and sell it today you would earn a total of  2,491,928  from holding Dongsin Engineering Construction or generate 170.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Dongsin Engineering Constructi  vs.  Kukdong Oil Chemicals

Dongsin Engineering

Risk-Adjusted Performance

12 of 100

Good

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

Kukdong Oil Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kukdong Oil Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kukdong Oil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dongsin Engineering and Kukdong Oil

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

The idea behind Dongsin Engineering Construction and Kukdong Oil Chemicals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.