Correlation Between Dong A and Hanil Iron

Can any of the company-specific risk be diversified away by investing in both Dong A and Hanil Iron 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 Dong A and Hanil Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dong A Steel Technology and Hanil Iron Steel, you can compare the effects of market volatilities on Dong A and Hanil Iron 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 Dong A with a short position of Hanil Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Hanil Iron.

Diversification Opportunities for Dong A and Hanil Iron

0.0

Correlation Coefficient

Dong A  Hanil Iron

Pay attention - limited upside

The 3 months correlation between Dong and Hanil is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Hanil Iron Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanil Iron Steel and Dong A 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 Dong A Steel Technology are associated (or correlated) with Hanil Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanil Iron Steel has no effect on the direction of Dong A i.e., Dong A and Hanil Iron go up and down completely randomly.

Pair Corralation between Dong A and Hanil Iron

Assuming the 90 days trading horizon Dong A Steel Technology is expected to generate 0.99 times more return on investment than Hanil Iron. However, Dong A Steel Technology is 1.01 times less risky than Hanil Iron. It trades about 0.03 of its potential returns per unit of risk. Hanil Iron Steel is currently generating about -0.02 per unit of risk. If you would invest  283,274  in Dong A Steel Technology on December 23, 2024 and sell it today you would earn a total of  6,726  from holding Dong A Steel Technology or generate 2.37% return on investment over 90 days.

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

Dong A Steel Technology  vs.  Hanil Iron Steel

Dong A Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Steel Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dong A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hanil Iron Steel

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Dong A and Hanil Iron

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

The idea behind Dong A Steel Technology and Hanil Iron Steel 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 Transaction History module to view history of all your transactions and understand their impact on performance.