Correlation Between Dong A and SK Bioscience

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

Diversification Opportunities for Dong A and SK Bioscience

-0.21

Correlation Coefficient

Dong A  SK Bioscience

Very good diversification

The 3 months correlation between Dong and 302440 is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and SK Bioscience Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Bioscience 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 SK Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Bioscience has no effect on the direction of Dong A i.e., Dong A and SK Bioscience go up and down completely randomly.

Pair Corralation between Dong A and SK Bioscience

Assuming the 90 days trading horizon Dong A Steel Technology is expected to generate 0.99 times more return on investment than SK Bioscience. However, Dong A Steel Technology is 1.01 times less risky than SK Bioscience. It trades about -0.02 of its potential returns per unit of risk. SK Bioscience Co is currently generating about -0.02 per unit of risk. If you would invest  448,134  in Dong A Steel Technology on October 10, 2024 and sell it today you would lose (148,134) from holding Dong A Steel Technology or give up 33.06% 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.  SK Bioscience 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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SK Bioscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SK Bioscience Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SK Bioscience is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dong A and SK Bioscience

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

The idea behind Dong A Steel Technology and SK Bioscience 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.