Correlation Between Dong A and Parksystems Corp

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

Diversification Opportunities for Dong A and Parksystems Corp

-0.16

Correlation Coefficient

Dong A  Parksystems Corp

Good diversification

The 3 months correlation between Dong and Parksystems is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and Parksystems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parksystems Corp 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 Parksystems Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parksystems Corp has no effect on the direction of Dong A i.e., Dong A and Parksystems Corp go up and down completely randomly.

Pair Corralation between Dong A and Parksystems Corp

Assuming the 90 days trading horizon Dong A Steel Technology is expected to under-perform the Parksystems Corp. But the stock apears to be less risky and, when comparing its historical volatility, Dong A Steel Technology is 1.07 times less risky than Parksystems Corp. The stock trades about -0.03 of its potential returns per unit of risk. The Parksystems Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,934,700  in Parksystems Corp on October 4, 2024 and sell it today you would earn a total of  10,215,300  from holding Parksystems Corp or generate 93.42% return on investment over 90 days.

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

Dong A Steel Technology  vs.  Parksystems Corp

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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parksystems Corp

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Dong A and Parksystems Corp

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

The idea behind Dong A Steel Technology and Parksystems Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.