Correlation Between Dong-A Steel and DONGKUK COATED

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

Diversification Opportunities for Dong-A Steel and DONGKUK COATED

0.26

Correlation Coefficient

Dong-A Steel  DONGKUK COATED

Modest diversification

The 3 months correlation between Dong-A and DONGKUK is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Steel Technology and DONGKUK TED METAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONGKUK TED METAL 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 DONGKUK COATED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONGKUK TED METAL has no effect on the direction of Dong-A Steel i.e., Dong-A Steel and DONGKUK COATED go up and down completely randomly.

Pair Corralation between Dong-A Steel and DONGKUK COATED

Assuming the 90 days trading horizon Dong A Steel Technology is expected to generate 1.0 times more return on investment than DONGKUK COATED. However, Dong A Steel Technology is 1.0 times less risky than DONGKUK COATED. It trades about -0.02 of its potential returns per unit of risk. DONGKUK TED METAL is currently generating about -0.1 per unit of risk. If you would invest  448,000  in Dong A Steel Technology on September 22, 2024 and sell it today you would lose (159,000) from holding Dong A Steel Technology or give up 35.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	76.86%
Values	Daily Returns

Dong A Steel Technology  vs.  DONGKUK TED METAL

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.

DONGKUK TED METAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DONGKUK TED METAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DONGKUK COATED 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 Steel and DONGKUK COATED

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

The idea behind Dong A Steel Technology and DONGKUK TED METAL 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.