Correlation Between Kukil Metal and Dong A

Can any of the company-specific risk be diversified away by investing in both Kukil Metal and Dong A 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 Kukil Metal and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kukil Metal Co and Dong A Eltek, you can compare the effects of market volatilities on Kukil Metal and Dong A 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 Kukil Metal with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kukil Metal and Dong A.

Diversification Opportunities for Kukil Metal and Dong A

0.5

Correlation Coefficient

Kukil Metal  Dong A

Very weak diversification

The 3 months correlation between Kukil and Dong is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Kukil Metal Co and Dong A Eltek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Eltek and Kukil Metal 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 Kukil Metal Co are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Eltek has no effect on the direction of Kukil Metal i.e., Kukil Metal and Dong A go up and down completely randomly.

Pair Corralation between Kukil Metal and Dong A

Assuming the 90 days trading horizon Kukil Metal Co is expected to generate 0.66 times more return on investment than Dong A. However, Kukil Metal Co is 1.52 times less risky than Dong A. It trades about -0.04 of its potential returns per unit of risk. Dong A Eltek is currently generating about -0.18 per unit of risk. If you would invest  179,000  in Kukil Metal Co on September 21, 2024 and sell it today you would lose (4,000) from holding Kukil Metal Co or give up 2.23% of portfolio value over 90 days.

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

Kukil Metal Co  vs.  Dong A Eltek

Kukil Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kukil Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dong A Eltek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong A Eltek has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kukil Metal and Dong A

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

The idea behind Kukil Metal Co and Dong A Eltek 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.