Correlation Between BooKook Steel and Dongnam Chemical

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Can any of the company-specific risk be diversified away by investing in both BooKook Steel and Dongnam Chemical 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 BooKook Steel and Dongnam Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BooKook Steel Co and Dongnam Chemical Co, you can compare the effects of market volatilities on BooKook Steel and Dongnam Chemical 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 BooKook Steel with a short position of Dongnam Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BooKook Steel and Dongnam Chemical.

Diversification Opportunities for BooKook Steel and Dongnam Chemical

BooKookDongnamDiversified AwayBooKookDongnamDiversified Away100%
0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between BooKook and Dongnam is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BooKook Steel Co and Dongnam Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongnam Chemical and BooKook 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 BooKook Steel Co are associated (or correlated) with Dongnam Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongnam Chemical has no effect on the direction of BooKook Steel i.e., BooKook Steel and Dongnam Chemical go up and down completely randomly.

Pair Corralation between BooKook Steel and Dongnam Chemical

Assuming the 90 days trading horizon BooKook Steel Co is expected to under-perform the Dongnam Chemical. In addition to that, BooKook Steel is 1.19 times more volatile than Dongnam Chemical Co. It trades about -0.04 of its total potential returns per unit of risk. Dongnam Chemical Co is currently generating about 0.04 per unit of volatility. If you would invest  3,282,809  in Dongnam Chemical Co on October 10, 2024 and sell it today you would earn a total of  107,191  from holding Dongnam Chemical Co or generate 3.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

BooKook Steel Co  vs.  Dongnam Chemical Co

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-505
JavaScript chart by amCharts 3.21.15026940 023450
       Timeline  
BooKook Steel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BooKook Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BooKook Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2,1002,2002,3002,4002,5002,6002,7002,800
Dongnam Chemical 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Dongnam Chemical Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dongnam Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan29,00030,00031,00032,00033,000

BooKook Steel and Dongnam Chemical Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.17-2.37-1.58-0.78-0.01270.721.492.253.013.78 0.040.060.080.100.120.140.16
JavaScript chart by amCharts 3.21.15026940 023450
       Returns  

Pair Trading with BooKook Steel and Dongnam Chemical

The main advantage of trading using opposite BooKook Steel and Dongnam Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BooKook Steel position performs unexpectedly, Dongnam Chemical 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 Dongnam Chemical will offset losses from the drop in Dongnam Chemical's long position.
The idea behind BooKook Steel Co and Dongnam Chemical 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.
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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