Correlation Between Dong-A Steel and Spolytech

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

Diversification Opportunities for Dong-A Steel and Spolytech

-0.17

Correlation Coefficient

Dong-A Steel  Spolytech

Good diversification

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

Pair Corralation between Dong-A Steel and Spolytech

Assuming the 90 days trading horizon Dong A Steel Technology is expected to generate 1.77 times more return on investment than Spolytech. However, Dong-A Steel is 1.77 times more volatile than Spolytech Co. It trades about -0.01 of its potential returns per unit of risk. Spolytech Co is currently generating about -0.11 per unit of risk. If you would invest  313,500  in Dong A Steel Technology on September 13, 2024 and sell it today you would lose (16,000) from holding Dong A Steel Technology or give up 5.1% of portfolio value over 90 days.

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

Dong A Steel Technology  vs.  Spolytech Co

Dong A Steel

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, Dong-A Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Spolytech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spolytech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dong-A Steel and Spolytech

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

The idea behind Dong A Steel Technology and Spolytech 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.