Correlation Between Dong-A Steel and Orbitech

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

Diversification Opportunities for Dong-A Steel and Orbitech

0.7

Correlation Coefficient

Dong-A Steel  Orbitech

Poor diversification

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

Pair Corralation between Dong-A Steel and Orbitech

Assuming the 90 days trading horizon Dong A Steel Technology is expected to generate 1.06 times more return on investment than Orbitech. However, Dong-A Steel is 1.06 times more volatile than Orbitech Co. It trades about -0.01 of its potential returns per unit of risk. Orbitech Co is currently generating about -0.02 per unit of risk. If you would invest  363,864  in Dong A Steel Technology on December 4, 2024 and sell it today you would lose (60,364) from holding Dong A Steel Technology or give up 16.59% of portfolio value over 90 days.

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

Dong A Steel Technology  vs.  Orbitech Co

Dong A Steel

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Steel Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dong-A Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Orbitech

Risk-Adjusted Performance

OK

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

Pair Trading with Dong-A Steel and Orbitech

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

The idea behind Dong A Steel Technology and Orbitech 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .