Correlation Between Dong A and ENF Technology

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

Diversification Opportunities for Dong A and ENF Technology

0.56

Correlation Coefficient

Dong A  ENF Technology

Very weak diversification

The 3 months correlation between Dong and ENF is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and ENF Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENF Technology 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 ENF Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENF Technology has no effect on the direction of Dong A i.e., Dong A and ENF Technology go up and down completely randomly.

Pair Corralation between Dong A and ENF Technology

Assuming the 90 days trading horizon Dong A is expected to generate 14.55 times less return on investment than ENF Technology. But when comparing it to its historical volatility, Dong A Steel Technology is 1.74 times less risky than ENF Technology. It trades about 0.03 of its potential returns per unit of risk. ENF Technology Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,699,849  in ENF Technology Co on December 23, 2024 and sell it today you would earn a total of  995,151  from holding ENF Technology Co or generate 58.54% return on investment over 90 days.

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

Dong A Steel Technology  vs.  ENF Technology Co

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.

ENF Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ENF Technology Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ENF Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dong A and ENF Technology

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

The idea behind Dong A Steel Technology and ENF Technology 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.