Correlation Between Dong-A Steel and DB Financial

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Can any of the company-specific risk be diversified away by investing in both Dong-A Steel and DB Financial 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 Steel and DB Financial 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 DB Financial Investment, you can compare the effects of market volatilities on Dong-A Steel and DB Financial 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 Steel with a short position of DB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong-A Steel and DB Financial.

Diversification Opportunities for Dong-A Steel and DB Financial

Dong-A016610Diversified AwayDong-A016610Diversified Away100%
-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Dong-A and 016610 is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and DB Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Financial Investment and Dong-A 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 Dong A Steel Technology are associated (or correlated) with DB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Financial Investment has no effect on the direction of Dong-A Steel i.e., Dong-A Steel and DB Financial go up and down completely randomly.

Pair Corralation between Dong-A Steel and DB Financial

Assuming the 90 days trading horizon Dong A Steel Technology is expected to under-perform the DB Financial. In addition to that, Dong-A Steel is 1.77 times more volatile than DB Financial Investment. It trades about -0.24 of its total potential returns per unit of risk. DB Financial Investment is currently generating about 0.09 per unit of volatility. If you would invest  509,000  in DB Financial Investment on September 24, 2024 and sell it today you would earn a total of  18,000  from holding DB Financial Investment or generate 3.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dong A Steel Technology  vs.  DB Financial Investment

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -15-10-5051015
JavaScript chart by amCharts 3.21.15058730 016610
       Timeline  
Dong A Steel 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Dong A Steel Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec2,6002,8003,0003,2003,4003,6003,8004,000
DB Financial Investment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DB Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec4,9005,0005,1005,2005,3005,4005,5005,6005,700

Dong-A Steel and DB Financial Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.74-4.3-2.86-1.420.01.412.824.235.64 0.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.15058730 016610
       Returns  

Pair Trading with Dong-A Steel and DB Financial

The main advantage of trading using opposite Dong-A Steel and DB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong-A Steel position performs unexpectedly, DB Financial 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 DB Financial will offset losses from the drop in DB Financial's long position.
The idea behind Dong A Steel Technology and DB Financial Investment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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