Correlation Between Daedong Steel and DYPNF CoLtd

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

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

Diversification Opportunities for Daedong Steel and DYPNF CoLtd

0.17

Correlation Coefficient

Daedong Steel  DYPNF CoLtd

Average diversification

The 3 months correlation between Daedong and DYPNF is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Daedong Steel Co and DYPNF CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DYPNF CoLtd and Daedong 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 Daedong Steel Co are associated (or correlated) with DYPNF CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DYPNF CoLtd has no effect on the direction of Daedong Steel i.e., Daedong Steel and DYPNF CoLtd go up and down completely randomly.

Pair Corralation between Daedong Steel and DYPNF CoLtd

Assuming the 90 days trading horizon Daedong Steel is expected to generate 9.57 times less return on investment than DYPNF CoLtd. But when comparing it to its historical volatility, Daedong Steel Co is 1.24 times less risky than DYPNF CoLtd. It trades about 0.02 of its potential returns per unit of risk. DYPNF CoLtd is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,078,000  in DYPNF CoLtd on September 19, 2024 and sell it today you would earn a total of  197,000  from holding DYPNF CoLtd or generate 18.27% return on investment over 90 days.

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

Daedong Steel Co  vs.  DYPNF CoLtd

Daedong Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

DYPNF CoLtd

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DYPNF CoLtd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DYPNF CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daedong Steel and DYPNF CoLtd

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

The idea behind Daedong Steel Co and DYPNF CoLtd 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.