Correlation Between Dong-A Steel and LIG ES

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

Diversification Opportunities for Dong-A Steel and LIG ES

0.65

Correlation Coefficient

Dong-A Steel  LIG ES

Poor diversification

The 3 months correlation between Dong-A and LIG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and LIG ES SPAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIG ES SPAC 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 LIG ES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIG ES SPAC has no effect on the direction of Dong-A Steel i.e., Dong-A Steel and LIG ES go up and down completely randomly.

Pair Corralation between Dong-A Steel and LIG ES

Assuming the 90 days trading horizon Dong-A Steel is expected to generate 7.44 times less return on investment than LIG ES. But when comparing it to its historical volatility, Dong A Steel Technology is 1.84 times less risky than LIG ES. It trades about 0.03 of its potential returns per unit of risk. LIG ES SPAC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  341,500  in LIG ES SPAC on December 4, 2024 and sell it today you would earn a total of  88,500  from holding LIG ES SPAC or generate 25.92% return on investment over 90 days.

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

Dong A Steel Technology  vs.  LIG ES SPAC

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 2 (%) of all global equities and portfolios over the last 90 days. 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.

LIG ES SPAC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LIG ES SPAC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, LIG ES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dong-A Steel and LIG ES

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

The idea behind Dong A Steel Technology and LIG ES SPAC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.