Correlation Between Taegu Broadcasting and Dongkuk Steel

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

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

Diversification Opportunities for Taegu Broadcasting and Dongkuk Steel

-0.2

Correlation Coefficient

Taegu Broadcasting  Dongkuk Steel

Good diversification

The 3 months correlation between Taegu and Dongkuk is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Taegu Broadcasting and Dongkuk Steel Mill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongkuk Steel Mill and Taegu Broadcasting 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 Taegu Broadcasting are associated (or correlated) with Dongkuk Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongkuk Steel Mill has no effect on the direction of Taegu Broadcasting i.e., Taegu Broadcasting and Dongkuk Steel go up and down completely randomly.

Pair Corralation between Taegu Broadcasting and Dongkuk Steel

Assuming the 90 days trading horizon Taegu Broadcasting is expected to under-perform the Dongkuk Steel. But the stock apears to be less risky and, when comparing its historical volatility, Taegu Broadcasting is 19.41 times less risky than Dongkuk Steel. The stock trades about -0.03 of its potential returns per unit of risk. The Dongkuk Steel Mill is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  842,846  in Dongkuk Steel Mill on September 20, 2024 and sell it today you would lose (81,846) from holding Dongkuk Steel Mill or give up 9.71% of portfolio value over 90 days.

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

Taegu Broadcasting  vs.  Dongkuk Steel Mill

Taegu Broadcasting

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Taegu Broadcasting are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Taegu Broadcasting sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongkuk Steel Mill

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Taegu Broadcasting and Dongkuk Steel

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

The idea behind Taegu Broadcasting and Dongkuk Steel Mill 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.